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Are You Ready for Techstars Iowa?

It looks like Techstars, the world-famous $18B American seed accelerator, will be coming to Iowa, namely Des Moines. According to this job listing, Techstars is looking for a Managing Director to run Techstars Iowa.

As is the case with the other 50+ Accelerator programs Techstars operates around the globe, the Des Moines Managing Director will be responsible for investment, namely finding and investing in the companies with the best opportunity for growth under the Techstars program. The Managing Director will work with a Program Manager who will focus on assisting companies accepted into the program with Techstars’ proven strategies for growth.

Given Iowa’s, and particularly Des Moines’, wealth of technology talent, entrepreneurship, and investment capital, it not surprising Techstars has singled out the capital city for its next accelerator. This looks to be an incredible opportunity for all parties involved.

If you are interested in applying for the Techstars program, you better start working on your application now. Although Techstars has accepted over sixteen hundred companies into its programs over the years, the typical acceptance rate is less than one percent.

Brett Trout

Posted in StartUp.

Disney Sues Locast for Providing Local Television Stations Online

Disney, ABC, Fox, CBS, NBC, and others have just sued Sports Fans Coalition NY, Inc. (“SFCN,” the parent company of Locast) for allowing consumers to watch local television affiliates online through the Locast service. You can read the lawsuit here. The lawsuit revolves around the issue of local network television affiliates. Although most local network affiliates are available for free over-the-air, consumers already paying for satellite and cable subscriptions would rather not have to deal with an antenna and all of the problems associated with receiving over-the-air transmissions.

Satellite and cable providers are happy to provide the local affiliates to consumers. Indeed, The Telecommunications Act of 1996 actually requires that local television stations give cable systems or other multichannel video programming distributors (MVPD) consent to rebroadcast the local television stations’ signals. Satellite and cable providers negotiate with local television stations for this consent to rebroadcast, typically in exchange for cash or other consideration. If the satellite or cable provider is unwilling to pay the price dictated by the local affiliate, however, the consumer ends up not being able to view the local affiliate. This happens more than you might think. Currently, due to an apparent breakdown of such negotiations the ABC affiliate in my own market is unavailable through my DirecTV subscription.

With consumers bearing the brunt of these negotiation breakdowns, both in terms of unavailable local channels and the costs of available local channels passed along by their subscription providers, a new service entered the scene. As I detailed back in February Locast.org is a service that offers local broadcast television stations online. Locast argues that since it is adhering to a loophole in copyright law that allows nonprofits to rebroadcast local affiliates to extend their reach, it is not infringing anyone’s copyright. The law in question, 17 U.S.C. § 111, states “The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if [….] the secondary transmission [….] is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.” When Congress wrote 17 U.S.C. § 111, the theory was to protect local nonprofits that simply installed repeater antennae to boost local affiliate signals for consumers with poor or obstructed signal.

How has Locast succeeded in exploiting 17 U.S.C. § 111 to offer local affiliate transmissions online where others have failed? First, to comport with 17 U.S.C. § 111, a rebroadcaster must be a nonprofit. Second, the rebroadcaster must be rebroadcasting without the purpose of commercial advantage. Those two requirements are fairly large hurdles for most rebroadcasters to overcome. So how is Locast surviving? Where is it getting its money?

When I wrote about Locast back in February of this year, it did not appear clear that Locast had very deep pockets. According to today’s lawsuit, however, the Plaintiffs assert that SFCN, through Locast, is receiving large donations from pay-TV distributor AT&T. Why would AT&T want to pay to see a rebroadcaster like Locast to succeed? One reason may be that if Locast succeeds, that will provide consumers with an option to receive local affiliates directly without an antenna. If consumers can receive local affiliates directly online, the inability to receive local affiliates through their satellite or cable provider may not cause consumers to drop their satellite or cable provider. This dramatically reduces the incentive of satellite and cable providers to pay the large amounts of money demanded by local affiliates to rebroadcast their stations through the satellite or cable provider.

Ten years ago asking a consumer to get out of their satellite or cable package and open another package to watch their local affiliates might have been a big ask. Today, with consumers accustomed to getting in and out of packages to view content on HBO, Netflix, Hulu, etc, the ask is not so big. As a result, if Locast were to go nationwide, the market for local affiliates selling rebroadcast rights to satellite and cable providers could disappear.

With that background in mind, it is not difficult to see why Disney et al. is worried about Locast and why Disney is suing Locast’s parent company SFCN. This is far from the first time Disney has aggressively asserted copyright law to its advantage, and it will likely not be its last.

The court in this case will have the difficult job of applying old law to new technology. Did Congress intend 17 U.S.C. § 111 to apply to nonprofits that rebroadcast local network affiliates online? Does receiving money from AT&T and removing ads in return for consumer payment constitute “commercial advantage”? Does collecting consumer data constitute “commercial advantage”? These are the issues that the district court, and most likely an appellate court, will have to decide.

Regardless of how this lawsuit resolves, it is unlikely the broader issue of online rebroadcasting of local television affiliates will resolve without congressional intervention. Given the technological and legal complexities inherent in the issue, it is hard to see Congress passing a new law in this area without substantial help from lobbyists on both sides of the issue. If Disney’s past copyright lobbying efforts are any indication, things do not bode well for consumers.

Brett Trout

Posted in Copyright Law, Internet Law.

The Supreme Court and the Registration of the Trademark “FUCT”

“Viewpoint discrimination is poison to a free society. But in many countries with constitutions or legal traditions that claim to protect freedom of speech, serious viewpoint discrimination is now tolerated, and such discrimination has become increasingly prevalent in this country. At a time when free speech is under attack, it is especially important for this Court to remain firm on the principle that the First Amendment does not tolerate viewpoint discrimination. We reaffirm that principle today.”

– Justice Samuel Alito Concurring with the majority opinion in Iancu, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office v. Brunetti

Defending the Thought We Hate
As I predicted back in January, the United States Supreme Court today invalidated that portion of the Lanham Act 15 U.S. Code §?1052(a) prohibiting registration of trademarks that “[c]onsist[ ] of or comprise[ ] immoral[ ] or scandalous matter.” Back in 2017 the United States Supreme Court invalidated another portion of Section 2(a) of the Lanham Act that prevented federal registration of “disparaging” trademarks. That case dealt with an Asian American musician, Simon Tam, attempting to register the trademark “The Slants” for his band. In invalidating the “disparagement” section of the Lanham Act in Matal v. Tam, 137 S.Ct. 1744 (2017), Justice Alito, writing for the unanimous Supreme Court, quoted Justice Oliver Wendell Holmes, stating “Speech that demeans on the basis of race, ethnicity, gender, religion, age, disability, or any other similar ground is hateful; but the proudest boast of our free speech jurisprudence is that we protect the freedom to express ‘the thought that we hate.’”

Appealing the Case Up the Ladder

The Brunetti case involved Erik Brunetti, and artist and entrepreneur, who sought federal registration of the trademark “FUCT.” Given the Lanham Act’s prohibition on registering immoral and scandalous matter, the examiner at the United States Patent and Trademark Office (USPTO) rejected Brunetti’s application for registration, as did the USPTO’s Trade-mark Trial and Appeal Board (TTAB). Brunetti then appealed his case to the Court of Appeals for the Federal Circuit. The Federal Circuit invalidated the portion of the Lanham Act dealing with immoral and scandalous matter for violating the First Amendment. As the Supreme Court usually does when a lower court has invalidated a federal statute, The Supreme Court granted certiorari (agreed to hear the case on appeal).

The USPTO’s Viewpoint Bias

In upholding the Federal Circuit decision invalidating the immoral and scandalous prohibitions in the Lanham Act, the Supreme Court analyzed not only the Lanham Act, but how the USPTO was applying the Lanham Act in practice. The Court noted that the USPTO had rejected trademark registrations for pro-drug trademarks, while granting registrations for anti-drug trademarks. Similarly, the USPTO had granted trademark registrations for religious terms used for religious purposes, but rejected registrations for religious terms used for secular purposes.

The USPTO Viewpoint Bias Violates the First Amendment
The Supreme Court acknowledged that in the examples cited, the USPTO was rejecting trademarks expressing “opinions that are, at the least, offensive to many Americans.” The Court, however, referred back to its ruling in Tam, noting: “a law disfavoring ‘ideas that offend’ discriminates based on viewpoint, in violation of the First Amendment.” Determining that the immoral and scandalous prohibition in the Lanham Act “aim[s] at the suppression of ” views, the majority had no option other than to invalidate the law.

The Bad News
While it is great news that the Supreme Court has once again invalidated a portion of the Lanham Act in defense of the First Amendment, and defended the right to offend, the partial dissenting opinions are cause for concern. Justices Sotomayor, Breyer, and Roberts all dissented from the majority opinion in that they all believe the offending portions of the Lanham Act should simply be narrowly construed as to apply only to obscene, vulgar, or profane trademarks. While this may seem reasonable on its face, it is unclear how such an interpretation could be implemented without the USPTO examiner’s once again engaging in improper viewpoint discrimination.

In Defense of the Offensive
As a more general matter, I do not know if it is a good idea to have our interpretations of obscenity, vulgarity, and profanity defined by those in the most ivory of towers, completely disconnected from basic cable and the real world watching it. I am going to go out on a limb and opine that what the Justices of the United States Supreme Court might find obscene, may not be obscene to the less priggish South Park viewers in our midst. It is therefore unclear how anyone, let alone academics isolated from hoi polloi, would be able to divide proposed trademarks into a classification like “vulgar.” Such restrictions are nothing more than a defense of ongoing government-mandated viewpoint discrimination. As noted above, “[v]iewpoint discrimination is poison to a free society.”

Brett Trout








Posted in Internet Law, social media, Trademark Law.

Olivia Jade Finds Out Preparing a Trademark Application is Harder than You Think

After allegedly allowing her parents, Lori Loughlin and J. Mossimo Giannulli, handle having someone else fill out her application to the University of Southern California, you would think Olivia Jade would be well-versed in getting other people to fill out applications for her. Unfortunately, like the rest of us, the people the 19-year-old beauty influencer Olivia Jade had fill out her trademark application for “Olivia Jade Beauty” made a few technical errors.

The technical errors included using the wrong punctuation in the trademark application. Unfortunately for Olivia Jade, the Trademark Office, has some rather hard and fast rules when it comes to using commas and semicolons in a trademark application. Not to bore anyone with the details, but in a trademark application for federal trademark registration, commas are to be used in the identification of goods or services to separate items within a particular category of goods or services. Semicolons, on the other hand, are used in the identification of goods or services to separate distinct categories of goods or services within a single class.  The proper use of commas and semicolons is far from the most esoteric of the technical requirements mandated by the United States Patent and Trademark Office (USPTO). If anyone is interested in perusing hundreds of pages of these odd and ever-changing rules, the The Trademark Manual of Examining Procedure (TMEP) will be right up their alley. Master the TMEP and navigating the odd world of applying for federal trademark registration should be no problem, at least until the USPTO rejects the trademark application based on a court case or two, at which point it may require a law degree to prepare a proper legal argument in response.

This is not so much a critique of Olivia Jade’s trademark lawyers, who by all estimation are generally very good at what they do. This is more to point out how difficult and technical preparing an application for federal trademark registration can be. If even veteran trademark lawyers, with hundreds of federal trademark applications under their collective belts, have difficulty preparing trademark application and comporting with all the technicalities required by the USPTO, just think how difficult it would be for a layperson to get it right.

One big difference between trademark lawyers and laypeople is that when seasoned trademark lawyers make a minor technical error, they typically remedy it in a way that does not permanently impair any trademark registration eventually issuing on the application. Conversely, when a layperson makes an error in a federal trademark application, such as an incorrect date of first use, the trademark registration may issue with the defect in place.

The trademark owner may never realize their mistake until they actually try to defend or enforce their trademark rights. It is at this point, when the opposing party has their own trademark lawyer look into the matter, that the error will likely be revealed. Such revelation could invalidate the trademark registration and undermine the trademark owner’s attempt to defend or assert federal trademark rights they never really had, but it could also force the trademark owner to pay potentially hundreds of thousands of dollars or more in punitive damages and the other parties’ attorneys’ fees.

The bottom line is that navigating the Byzantine world of federal trademark applications is hard. It takes a lot of study, and a lot of talent to do it well. Olivia Jade’s trademark lawyer made some mistakes in her trademark application, but they will fix those mistakes, and make sure the resulting trademark registration will not implode five years down the road when it comes time to assert the trademark registration against an infringer. Whether you are a start-up or a Fortune 1000 company, this is critical information to understand before embarking on any trademark or branding protection strategy.

Brett Trout

Posted in Choosing the Best Lawyer, social media, Trademark Law.

Elizabeth Holmes, Theranos, and the Patenting of Vaporware

Elizabeth Holmes set the biotech investment world on its head when she announced that her company had developed a small machine capable of performing hundreds of blood tests on tiny blood samples at a greatly reduced cost. Her company
Theranos (a portmanteau of “therapy” and “diagnosis”), immediately began receiving investment capital. These investments eventually totaled over $700 million, skyrocketing the company’s valuation to over $9 billion. But it was all based on a lie. Ms. Holmes had no machine with these capabilities. Not only did such a machine not exist, but an expert in her own company admitted that producing a machine, in such a tiny form factor, with all of its claimed capabilities, was simply impossible.

So how did Elizabeth Holmes and Theranos raise hundreds of millions of dollars based on technology that it did not, and would never, have? As detailed in the new HBO documentary The Inventor: Out for Blood in Silicon Valley, there are several reasons Theranos was able to receive so much money, based on so little technology. One reason was Ms. Holmes’ cult of personality, that kept investors from questioning why the Emperor had no clothes. Another reason was her ability to attract powerfully influential board members, like Henry Kissinger and George P. Shultz, who understood little about biotech, and even less about Theranos’ calims of a tiny miracle machine. Ms. Holmes also brought in investors who, after investing large sums of money into Theranos, had a large incentive to convince new investors to invest even more money, thereby dramatically increasing the valuation of their initial position.

So why did none of these investors confirm that Theranos’ technology actually existed, or that such a technology was even theoretically possible? It appears that instead of conducting sufficient due diligence of Theranos on their own, investors may have blithely relied on the mistaken assumption that at least one earlier investor, in at least one prior Theranos investment round, did confirm that the technology existed, or was at least theoretically possible. So what about the early investors? Why did they not demand to see evidence that the technology was viable? One reason may have been the complexity of the technology and the patents that allegedly protected it. If the company holds multiple patents and employs experts in the field, such as former Stanford chemical engineering professor Channing Robertson, the technology must exist, right?

The problem investors failed to realize is that patents are no indication that a technology exists, or that the technology is even possible. There is no requirement that you have a prototype, or even prove the technology works, before the United States Patent and Trademark Office (USPTO) will grant you a patent. There is a requirement under 35 U.S. Code § 112(a) that a patent contain a written description of the invention and the manner of making it “in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains [….] to make and use the same.,” but you only have to state that. You do not actually have to submit any proof the technology is viable unless the USPTO requests it. And why would the USPTO request it? Why would anyone spend so much money patenting technology that does not exist?

Now if an examiner at the USPTO became aware that a particular technology is impossible to make or use according to a patent application’s written description, such as in the case of applicants trying to patent perpetual motion machines, the examiner will refuse to grant a patent on the technology. The problem is that patent examiners at the USPTO have no ability to use the written description of a patent application to try to actually build or use the claimed invention. In many cases, especially in the case of complex technology, confirming the patent accurately describes how to make or use a viable technology would require massive amounts of time and money to produce a prototype. Given the rarity of applicants spending massive amounts of money try to patent a technology that does not exist, forcing the USPTO to conduct experiments to determine the viability of every claimed invention would be a massive waste of time and resources. The USPTO is, therefore, left with no choice, but to assume that the patent applicant has described the technology in the patent application sufficiently to allow a person of ordinary skill in the art to produce the claimed technology.

Why is this not a bigger problem? Why are more companies not getting patents on vaporware? First, a patent only gives the patent owner the right to stop someone else from making, using, or selling, the technology claimed in the patent. If the technology does not exist, the patent owner has no rights to enforce. Second, if a patent owner were to get a patent on fake technology and then try to enforce its patent against a competitor making a different product, the competitor would investigate the patent, and call in experts to invalidate the patent in court, by proving that the description in the patent does not describe a technology in such full, clear, concise, and exact terms as to enable any person skilled in the art to make or use the technology. So even if the USPTO were to grant a patent on a technology that does not exist, the market would ordinarily weed out those patents before they can do any harm.

But what if a company obtained a patent on an impossible technology and never tried to enforce the patent against anyone? What if the company simply touted its technology as “patented”?

Many investors hold tight to the mistaken belief that the USPTO vets patents to make sure the technology claimed in the patent is real. They erroneously rely on the USPTO to do the complex, costly, and time-consuming due diligence that would be necessary to ensure a technology is viable. Many investors view a patent as a seal of approval from the government that the technology is real and no competitors are allowed to compete in the marketplace.

In actuality, a patent is no guarantee that: 1) the technology is viable; 2) that the patent is valid; or 3) that a competitive technology is infringing the patent. While a patent is presumed valid, if a competitor can present a court with evidence that the patent covers technology that was in the public domain, the court will invalidate the patent. Similarly, a patent can be broad or narrow. A broad patent provides its owner with a monopoly not only on the exact technology, but on alternative technologies a competitor may try to implement to get around the patent. Conversely, a narrow patent allows competitors to change one or two minor elements of the technology to legally circumvent the patent. The breadth or narrowness of a patent determines the scope of the monopoly the patent provides over competing products. Whether a competitive technology infringes a patent or not is determined by a judge or a jury, after reviewing all of the evidence.

Investors, therefore, need to be aware that patents are no substitute for the due diligence required to determine if a technology is real. It is simply not the USPTO’s job to determine the viability of a technology covered by a patent. Investors need to realize what patents represent and what they do not. When the USPTO grants a patent, it is simply stating that, based upon the USPTO’s necessarily limited investigation, the USPTO has not found any evidence that the patent is attempting to cover technology that already exists or that will never exist.

From a technology viability perspective, a patent grant is similar “not guilty” verdict in a criminal trial. A “not guilty” verdict is not a certification that the defendant is innocent. It is simply an indication that there was insufficient evidence to find the defendant guilty. Similarly, a patent is not a certification that the technology is viable, just that the USPTO has not been presented with any indication the technology is not viable.

While most of the blame for the massive Theranos investor losses rests with Elizabeth Holmes and Theranos, some of the blame rests with the investors themselves. This blame rests with Theranos investors failing to conduct sufficient due diligence and for failing to understand what a patent means and does not mean. Investors, especially when investing in complex technology, must conduct their own exhaustive due diligence into the viability of the technology. In today’s complex investment market, there is simply no excuse for investors failing to understand the interplay between patents and technology and how patents do, and do not, factor into proper due diligence protocols.

Brett Trout


Posted in Patent Law.

1 Million Cups Des Moines: Venture Capital Edition

1 Million Cups Des Moines is a weekly networking and presentation event for entrepreneurs and their latest projects. The event, and the coffee, are free. 1 Million Cups Des Moines events are held most Wednesday mornings at 8a.m. at the Science Center of Iowa, which also graciously provides free parking in the Science Center Parking Ramp during the event (be sure to grab a ticket from Emily on your way into the Science Center). Networking starts at 8a.m., with the presentation usually starting between 8:30a.m. and 9a.m.

While 1 Million Cups Des Moines events are typically presentations by up and coming companies, this Wednesday’s event will be a presentation by the venture capital group NextLevel Ventures. NextLevel Ventures typically invests $1 to $4 million for a minority ownership position in a company with the potential to scale rapidly. Qualifying companies generally have at least $1 million in annual sales and a defined path to a large increase in revenue.

If you have not attended a 1 Million Cups event before, here is a brief startup and venture capital glossary of frequently used funding terms to help make your first 1 Million Cups experience be a little more enjoyable:

Accelerator: A program designed to take startups that have already gained some traction to a place suitable for the next investment round. Accelerator programs often range from three to six months.

Accredited Investor: An individual investor who meets certain Securities and Exchange Commission minimums for income and net worth. Certain investment opportunities are only available to individuals who meet the qualifications of an Accredited Investor.

Angel Investor: Accredited investors who invest their own assets in early stage companies, such as startups. Angel Investors generally invest in companies that are at a stage too early to obtain venture capital funding.

Benchmark: The performance metrics a company must meet to receive an additional round of funding from an investment group. Benchmarks may include things like sales and revenue goals, customer satisfaction metrics, and market penetration.

Bootstrapped: A company funded by its own revenue stream and/or its owner’s personal assets.

Deal Flow: The rate at which an investor or investment group locates new investment opportunities. A venture capital group may have to review hundreds of potential deals to find a deal worth pursuing.

Debt Financing: Raising money by borrowing money from a financial institution or investor, with the promise that the debt will be repaid with interest.

Down Round: Offering a new round of equity financing at a corporate valuation lower than the corporate valuation for the last round of funding. For a down round to occur something negative and unforeseen typically occurred between the two funding rounds. Down rounds can be a case of throwing good money after bad or an opportunity for investors to grab equity at a discount.

Due Diligence: A comprehensive analysis of a company’s business plan, financials, management team, etc. by someone with particular expertise in such evaluations to determine the present and/or future value of the company.

Equity Financing: Raising money by selling partial ownership in the company.

Friends and Family Round: A type of bootstrapping that extends to friends and family investing more in their belief in the startup founder than in the type of arms-length due diligence undertaken by angel investors and venture capitalists.

Incubator: A group that provides start-up companies with resources in exchange for partial ownership of the start-up. Resources provided by an incubator may include corporate management services, office space, office resources, internet access, etc. Unlike accelerators, incubators usually work to build companies on a longer timeline.

Initial public offering (IPO). Offering ownership shares in the company to the public for the first time.

Lead Investor: An individual or entity, such as a venture capital group, that puts together a funding round for a company. If the Lead Investor also puts the most money into the investment round, the Lead Investor is said to be “leading the round.”

Mezzanine Financing: A mix of debt financing and equity financing, such as options. Typically used by companies that are past the startup stage, but which have not yet gone public.

Round: Venture Capital firms typically invest money in companies in rounds. The first round is often the Seed round, with subsequent rounds referred to by letters, such as Series A, B, C, etc. rounds.

Seed round: The company’s first official financing round. Seed rounds are often used for building prototypes, proof of concept, and/or creation of a minimum viable product.

Secondary Public Offering: Offering the public new stock after an IPO. Secondary Public Offerings may occur in the event the founder wishes to exit and/or decrease participation in running the company.

Stage: The current state of a growing company’s financial/growth position. There are no hard-and-fast rules for determining which stage a company is at or even what stages there are. Some terms used to define company stages include: seed, early, mid, and late stages. Many Venture Capital firms have a particular expertise helping companies in only one or two stages of development and may not invest in companies outside of these stages.

Venture Capital: Assets provided by venture capital entities to smaller, higher-risk, startup companies with a clear path to accelerated growth.

Venture Capitalist: An individual or entity that invests venture capital in a new company. Venture capitalists often limit their investment to companies at a particular stage of growth and/or a particular market sector with which the venture capitalist has an established expertise.

If you choose to stop by 1 Million Cups Des Moines this Wednesday, be sure to introduce yourself to this 6’4″ patent attorney who will be making the rounds and enjoying a cup of coffee with you.

Brett Trout

Posted in General. Tagged with , , .

ScoutSheet to Present at 1 Million Cups Des Moines

Presented at the Science Center of Iowa (SCI) every Wednesday morning, 1 Million Cups Des Moines showcases entrepreneurs and their growing businesses. The event, and the coffee, are free. This week’s presentation is by ScoutSheet, an SaaS product providing B2B sales and marketing professionals with new ways to discover customers.


So join us tomorrow and every Wednesday morning at 8a.m. at the Science Center of Iowa to network with other like-minded entrepreneurial professionals, and be sure to say “Hi” to your favorite patent lawyer while you are there. The Science Center provides free parking in the SCI Parking Ramp during the event (be sure to grab a ticket from Emily on your way into the Science Center). Networking starts at 8a.m., with the presentation usually starting between 8:30a.m. and 9a.m.


Brett Trout?

Posted in Des Moines, Events, StartUp.

1 Million Cups Tomorrow at the Des Moines Science Center

UPDATE: Due to the impending storm, tomorrow’s 1 Million Cups Des Moines event has been cancelled.

1 Million Cups Des Moines is a weekly showcase of entrepreneurs and their burgeoning projects. The event is free, as is the coffee. 1 Million Cups events are held most Wednesday mornings at 8a.m. at the Science Center of Iowa, which also graciously provides free parking in the Science Center Parking Ramp during the event (be sure to grab a ticket from Emily on your way into the Science Center). Networking starts at 8a.m., with the presentation usually starting between 8:30a.m. and 9a.m.

If this is your first 1 Million Cups, and you are new to the startup scene, here are some oft-used acronyms and their meanings to help your first 1 Million Cups experience be a little more understandable:

CRM (Customer-Relationship Management) – This is a system for using customer data, received through various channels, to optimize a company’s interactions with past, present, and future customers. Depending on the companies CRM goals, the company can use the system to retain current customers, obtain new customers, increase overall sales, etc.

KPI (Key Performance Indicator) – This is a list of factors that a company has chosen to assess the success of a company or a particular initiative undertaken by the company. KPIs can be quantitative, such as objective sales figures, or qualitative, such as subjective customer opinions about a particular product. Some examples of KPIs include profit, customer acquisition costs, employee satisfaction, etc.

MVP (Minimum Viable Product) – This is an early-stage version of the company’s good or service, having the minimum number of features necessary to address the needs of early adopters and to obtain feedback for future iterations of the good or service.

SAM (Serviceable Addressable Market) – This number is a subset of TAM (see below), representing the annual sales revenue or unit sales you could theoretically obtain with your good or service. For instance, if you were selling bubble gum, TAM would be the total candy market, and SAM would be that subset of the candy market that you are targeting and that would buy bubble gum.

SOM (Serviceable obtainable market) – This number is a subset of SAM (see above), representing the annual sales revenue or unit sales you can realistically obtain with your good or service.

TAM (Total Addressable Market) – This number is the annual sales revenue or unit sales, representing the entire potential worldwide market for your good or service. Any sales to anyone who could buy your good or service, across all industries, locations, and sales structures, is included in this number.

If you plan on attending 1 Million Cups Des Moines this week, be sure to find me and say “Hi” while you are there.

Brett Trout

Posted in Des Moines, Events, StartUp.

Upstart Locast Shakes Up the Local Television Broadcast Market

A tiny non-profit is making big waves in the vast ocean of television broadcasting. Locast.org now offers a handful of local broadcast television stations online and appears to have found a legal loophole that has prevented similar companies from streaming local broadcast television stations in the past.

Locast.org is what is known as a “digital translator.” Traditional broadcast translator services are low-powered television stations that rebroadcast the signal of full-power station to areas that the full-power station signals cannot reach. For instance if someone in Adair, Iowa was too far away to receive a local television broadcast signal from Des Moines, Iowa, a broadcast translator service could set up a rebroadcast antenna between the two cities, which would allow viewers from Adair to watch Des Moines local television broadcasts. Locast.org acts like these traditional broadcast translator services, except that instead of rebroadcasting a local broadcaster’s signal over-the-air, Locast.org rebroadcasts the signal over the Internet. To keep the reach of the rebroadcast local, Locast.org users must sign up online, provide a name and email address, certify the city they live in and are logging on from, and then select their city online. Currently, Locast.org is only available in a handful of markets, but intends to expand in the future.

So why has no one done this in the past? They have. It is just that they have all been shut down. To understand where other have failed and Locast.org appears to be succeeding requires a look at the law governing rebroadcast of local television signals. The Telecommunications Act of 1996 requires that local television stations consent to give cable systems or other multichannel video programming distributors (MVPD) to rebroadcast the local television stations’ signals. Cable companies, satellite providers, and other MVPDs negotiate with local television stations for this consent to rebroadcast, typically in exchange for cash or other consideration.

Failure of the cable provider and the local television station to come to an agreement can result in the cable company subscribers no longer being able to access their local television station. Combine this with people who do not have cable or satellite and still wish to receive their local television stations and you can see why the market for an alternative access to local television stations exists. Other companies have tried to do what Locast.org is doing. One such company was Aereo. When Aereo entered the market to provide users with internet access to local television stations a consortium of major broadcasters, including NBC, CBS, ABC and Fox, sued Aereo. The case went to the United States Supreme Court, which held that Aereo did indeed infringe the exclusive right of the owners of the copyright in the network broadcasts by selling Aereo’s subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air.

So what allows Locast.org to thrive, where competitors like Aereo have failed? The secret lies in one small section of the united States Code. Under 17 U.S.C. § 111, “The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if [….] the secondary transmission [….] is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.” According to 17 U.S.C. § 111, it appears that as long as Locast.org remains a nonprofit, it maintains the right to rebroadcast local television station signals to consumers in those markets.

So network broadcasters are left with a conundrum. Should they sue Locast.org at all? The upside of a successful lawsuit would mean the continuation of huge revenues across the country from cable companies paying to rebroadcast their signals. The downside of an unsuccessful lawsuit would likely mean a significant decrease in those revenues, as cable companies no longer felt compelled to deliver a product their customers can get for free online. From the network broadcasters’ vantage, Locast.org does not appear to have the resources to fight a lengthy copyright battle in federal court. However, the language of 17 U.S.C. § 111 appears clear, so clear, that a court might grant Locast.org summary judgment on the issue, meaning Locast.org could likely avoid the majority of the legal fees involved in these types of fights. Additionally, if a court were to grant Locast.org summary judgment, it is likely that donations to Locast.org would skyrocket overnight, leading to a rapid boost in its expansion plans.

Even more interesting, is what this upstart company might mean for cable and satellite providers. Video consumers have shown a strong affinity for à la carte picking and choosing among only those providers they want to watch i.e.(HBO, Amazon Prime, Netflix, etc.). Consumers do not want to pay a portion of the huge fees associated with channels like ESPN if they do not watch sports. If providers like Locast.org finally allow consumers to receive local stations without having to purchase predetermined packages from cable and satellite providers, and instead select only those channels they wish to receive, the market for cable and satellite providers may quickly plummet. At the present, network broadcasters, cable and satellite providers, and consumers all appear to be waiting to see how things progress with Locast.org before taking action. No one knows for sure how Locast.org’s risky gambit will pay off, but rest assured, it will be interesting.

Brett Trout

Posted in Copyright Law, General, Internet Law.

Board Game Patents – Magic: The Gathering

On August 5, 1993, mathematics Professor Richard Garfield released a set of 240 playing cards that would change the gaming landscape forever. But the story of Magic: The Gathering (“MTG” for short), starts much earlier. Garfield had been creating games since at least as early as 1982, when he came up with a card game called Five Magics. While Five Magics went on to inspire Garfield’s friends to develop additional magic-based card games, within a few years, Garfield had moved on.

In 1991, Garfield was working toward a Ph.D in one of my favorite areas of mathematics, combinatorics. By that time, Garfield had also teamed up with Mike Davis to create the popular board game RoboRally. Davis eventually pitched the game to Peter Adkison and James Hays of American game publisher Wizards of the Coast (“WotC”). Adkison and Hays loved RoboRally, but explained to Garfield and Davis that WotC was not in a position to release a board game at that time. Disappointed, Garfield responded, asking Hays what WotC was in a position to publish. Hays told Garfield that WotC was looking for a portable card game that people could take out and play during downtimes at conventions. The rest is history.

Returning home, Garfield dusted off Five Magics, began adding to the good things, and chiseling away at the bad. Garfield focused on combining the collectability of baseball cards and the chaotic asymmetrical energy of the iconic board game Cosmic Encounter with the beloved fantasy elements of Dungeons & Dragons. After multiple failed attempts, Garfield eventually landed on a game he simply called “Magic.” To deter people from buying hundreds of cards and only using the most powerful cards in his game, Garfield included an “ante” mechanism. The ante worked much like a claiming race in auto sports or horse racing. At the beginning of the game, both players would randomly select one card from their decks and place them aside. The winner of the game would then own the two ante cards. The ante system placed a financial disincentive on using only rare and expensive cards to compete against a deck of more common cards.

The first MTG core set that WotC released in August of 1993 was called Limited Edition: Alpha (nicknamed “Alpha”). Alpha’s first print run was a modest 2.6 million cards. WotC sold Alpha in 60 card starter decks and 15 card boosters. MTG turned out to be more successful than either Garfield or WotC could ever have imagined. Having just celebrated its 25th anniversary, MTG has become one of the biggest selling games of all time, today boasting over 20 million players and over 20 billion cards sold. Since its inception, MTG has been translated into over ten languages and has become the world’s “Most Played Trading Card Game.”

As shown below, the now-expired MTG patent originally covered a game mechanic whereby players would make some type of designation that certain cards were being brought into play. The “tapping” mechanic could involve simply rotating the cards sideways.

Claim 1 of U.S. Patent No. 5,662,332

1. A method of playing games involving two or more players, the method being suitable for games having rules for game play that include instructions on drawing, playing, and discarding game components, and a reservoir of multiple copies of a plurality of game components, the method comprising the steps of:
each player constructing their own library of a predetermined number of game components by examining and selecting game components from the reservoir of game components;
each player obtaining an initial hand of a predetermined number of game components by shuffling the library of game components and drawing at random game components from the player’s library of game components; and
each player executing turns in sequence with other players by drawing, playing, and discarding game components in accordance with the rules until the game ends, said step of executing a turn comprises:
(a) making one or more game components from the player’s hand of game components available for play by taking the one or more game components from the player’s hand and placing the one or more game components on a playing surface; and
(b) bringing into play one or more of the available game components by:
(i) selecting one or more game components; and
(ii) designating the one or more game components being brought into play by rotating the one or more game components from an original orientation to a second orientation.

Brett Trout

Posted in Board Games, Patent Law.