BEWARE OF SELF-SERVING PROFESSIONALS ------------------------------------ CONTENTS: I. YOUR ATTORNEY IS NOT YOUR FRIEND II. COMMENTS ON PATENT ATTORNEY PRACTICE III. YOUR BANKER IS NOT YOUR FRIEND IV. YOUR AD AGENCY CAN PRODUCE A PROGRAM THAT IS A TOTAL FLOP, YET BE ECSTATIC ABOUT IT. ====================================================================== I. YOUR ATTORNEY IS NOT YOUR FRIEND and THE OTHER GUY'S ATTORNEY IS SURELY YOUR ENEMY (and both are likely enemies of the deal) "Deal Breaker" as a synonoym for "Attorney" is not created out of nothing. -------------------------------- This file contains some Flags to watch for indicating that your, or the other guy's attorney is laying traps. Being Your Friend and Your Attorney are incompatible roles. The attorney business is a strange business, like none other. This document is not concerned with the practice of criminal law, lawsuits, or ambulance chasing although some of the premises apply there also. The attorney business is one of only two professions where the employee can, and is expected to, lie in support of his employer and neither be in danger of retribution. In Court, the Judge's instructions to the Jury paraphrase this view. In all other professions, such as used car sales, used job sales, etc., the employer is held to be ultimately responsible for the acts of his employees. This document is a collection of observations and not intended to describe any particular attorney or firm, to be legal advice, or advice on any particular set of facts or circumstances. Treat it as an alert signal and hearsay. Use your own good judgment to evaluate its applicability to your situations. Deal Breakers: How often have you heard the story "We were in agreement, but were not sure how to put it into 'legal terms', so we went to an attorney. The result is that we are now enemies and it cost a lot of money (fees)". "No one would represent both of us to simply put our agreement into shape. So we had to get two attorneys who squabbled on our nickel." "Later, we found out that the Clerk of the Court would advise us on procedure for free." The above is the typical "friendly divorce" or agreement between people who do not feel the other person is taking advantage. More important for the small businessman, the observation relates to contracts, especially employment contracts, buying/selling the business, and liability matters either as defendant or plaintiff. Ground Rules: An attorney's action is driven by at least Six factors: 1. The code of ethics; which requires the attorney to represent his client "zealously". 2. Ignorance of just about everything except "the law". 3. His own position and exposure relative to malpractice. 4. Building his accounts receivable. 5. Hubris and Arrogance. 6. The attorney is not responsible for the damage to the client who follows his "good law" advice. "Represent zealously" means do everything possible to promote the clients interest as defined by the relevant LAW. Compromise positions are not "represent zealously", which then exposes the attorney to malpractice. "Represent zealously" essentially precludes common sense solution and mediation. It also shields the attorney from having to understand or even recognize the business and social implications or damage incurred when his client following his advice. Most attorneys go to law school right from undergraduate studies. Few have serious experience in any commerce. (In-house council gives some exposure, but the knowledge is highly filtered by the position). Interview the actual person who is going to handle your case. Does he understand where you are coming from, your real needs? Some "good law advice" plays directly to enhance building his receivables. If you are in a situation where you may have a superior position, he will always advise an attack, ie sue, or grab all the marbles. A lawsuit certainly is expected to enrich his receivables, never mind that the probable settlement may be less than the attorney fee or that you may be building a reputation of being litagatious and/or mean. It was "good, zealous law advice", too bad. On the other end of the spectrum, if you are exposed to some liability in which you may not prevail, your attorney will always advise in a cautionary manner and you will likely bypass a viable business opportunity. There is no in- between in the practice of law. Somehow the attorney business has succeeded in establishing an air of all-knowing and not-to-be-questioned. Always subject your attorney's advice to the same cost/benefit/risk analysis that is regular procedure for all other business or family decisions. Another field which is bi-polar depending upon which end of the deal you are situated is contracts, especially form contracts that are expected to present to the contractor. Examples: Twice in my career as an Engineer, I have seen companies almost fail because the Attorney drafted a "good law" employment contract which was presented to the non-union engineering staff. Both cases attempted to impose a universal pre-assignment of all inventions conceived by employees already on the payroll. After threatening mass firings, keeping aloof, and a lot of posturing by the companies, a small group of engineers managed to sit down with the company representatives informally and off premisis with his hard-head-hat off and explain the objection. The problem was settled immediately as it was not actually the intention of management to enforce such a greedy, then legal, position. There are no U.S. statutes on the subject. Few attorneys know that in a some states, (Washington and California are two), such clauses are prohibited, thus unenforcable. However, they still represent the employee's word of honor and can be used against his character. The incidents described were solvable only because the companies had MUCH to lose if the targeted staff actually revolted or was fired. A prospective employee being presented with such a contract ordinarily has negligible leverage to change anything. The company never knows why that prize talent did not accept employment. Especially if the management is shielded from the real workings of recruiting by the used job sales department (personnel). Red Flags or neat-stuff depending on perspective: 1. Intrusive clauses; Patent assignment clause, broad proprietary information restriction, broad "author for hire" clauses that may even extend to non-company work, March-in rights Non-compete clauses Restrictions directed to your next employer or preventing particular employment. Unreasonable exit criteria. Too easy, too difficult 2. Strange phrases having puzzling interpretation by the contractee; Time is of the Essence Strings of nearly synonymous adjectives, verbs, nouns, or phrases Limited recourse Maintenance or defense Unclear limits on areas of responsibility, especially if it assigns responsibility for payment of certain costs. 3. Direct access to your assets; Who-pays-the-legal-costs or Attorney-fees clauses Maintenance or defense of patent or contract (a real bleeder) Certain or general obligation to pay development, promotion, inventory, fee, etc, costs. (a favorite of the artist's contracts in the music industry). Variable payment schedules or interest Unclear limits on responsibility for payment of certain costs. (watch for these in personal services contracts and others) 4. Escape hatches, and/or ability to destroy your business; Any payment schedule based on "profit", there will never be any. performance clauses work either way, seldom both. Contract assignable without your acquiescence. You cannot assign the contract (sell your business). Contractee can compete with you Exclusive territory clauses need to be tied to performance. 5. Sign now or the deal is off; a sooper bright flag. Pocket the contract and leave saying "I do not do anything affecting my family without my Wife's assent." This is an unassailable argument. Actually shows loyalty to previous commitment. Use the demonstrated loyalty argument to your advantage. Pocketing the contract puts it in your hands for future reference and is defensive if you need to explain your action or to sue for illegal practices, defamation, discrimination, unwarranted discharge, or fraud. -------- --------- Random "advice", use or ignore as you see fit: 1. You cannot afford not to seek your attorney's knowledge; You cannot afford to have him do work for you. 2. When presented with a contract containing clauses that are unclear or clearly unwarranted, the following argument may work. It is not an attack on the presenter but seeks agreement on principals then demands that the contract be changed in accordance with the agreed concepts. You: "This clause is strange, It could be interpreted as ------." Them: "I do not read it that way, anyway, WE would NEVER enforce such an interpretation... WE are NOT that kind of people. ?!?!" You: "If I can read it that way, so can someone else. We agree, and a handshake on the understanding is sufficient for us. But, a written contract like this is signed for the benefit of our successors. It is harsh reality that disaster can strike suddenly and someone else will be sitting at your or my desk. Since we agree that this is not your intention, lets remove it now to settle the matter for our successors." Action: Scratch out the offending clause before the presenter can act. Three results are probable. 1. The change will be done. 2. The presenter will claim he does not have the authority to agree to changes. Have it run it up the line 3. The presenter really wants the hook left in. If you are presented such a contract after being hired, even a few days after, or if you can pocket the contract and still start on the job, just ignore it for as long as you can. Often, it is simply forgotten. Otherwise, may be too late to impose new conditions of employment. This is one place you can effectively use a labor-law specialist. You really have nothing to lose. You do not want to work there or deal with such a person anyway. ----- ----- ------ If you are stuck with your new invention being covered by a patent assignment clause, there are a few things you can do depending upon whether the invention is actually made as part of your work or not. Arrange to have someone who is not an employee, preferably not your Wife, contribute to the invention. This makes them a joint or co-inventor and they do not have to assign or even co-operate, but the patent application requires their signature. There are ways your employer can file without their signature, but it is an extra and costly step. The outside inventor has the potential to mess up the legal status of the invention and will most likely be treated fairly, and by extension, the employed inventor also. It is very preferable that the outside inventor has actually contributed a key element that makes the invention work. It may not be necessary to fully disclose the contribution before a settlement is made. If it is not clear whether the contribution is key, a good bluff should work. Do not try a bluff without a good faith contribution to the invention as a whole, it just might be construed as attempted fraud. Ultimately, the signatures of the inventors of the invention as CLAIMED in the claims are the only ones to be on the patent. However, until the claims are allowed, anything in the specification, (to which all the inventors contributed) is potentially available to be claimed. Take Care -- The employee should make sure that he does not violate a security clause in his own contract when getting outside help. Seek competent legal advice on how to pull off adding outside assistance. If the employer paid for the development of the invention, by common law and simple ethics, he owns it. Assign it gracefully. If the invention relates to the employers business, but he did not pay for it, and he wants it, fight to be paid for your creation. If the invention does not relate to the employers business and he wants it, fight vigorously, assignment clause or no clause. Check your State Law. Try to get a modification to the contract that if the employer abandons the invention, you can pick it up either free or at an agreed price formula. There is nothing more disappointing than to watch someone buy your invention then not put it onto the market and not release it to someone who will. It is very annoying to have someone buy your invention then not pay royalties because he made no effort to make money from it. All too often an invention is purchased for the hidden purpose of preventing the invention from competing with the current product line. Most or all payment in royaltie form may also be a fraudulent scheme to buy an invention without intention of paying up. Sell for cash and/or minimum quarterly royalties, whether used or not. If the employer does not want your invention, regardless of what the contract says, get a release from the contract and/or common law for your invention. Shop rights -- Most invention assignment clauses reserve shop rights for all inventions even in Washington and California. In many cases, the employer will buy the product from you for shop use, but if they decide to make shop tools themselves, the monetary loss of them exercising shop rights is small and not worth a fight. However, there are two larger losses that should be paid for; 1. The existence of "Shop Rights" clause may nullify your right to the small entity 50% discount in patent fees, including BIG patent maintenance fees. 2. The existence of "Shop Rights" means you do not own 100% of the invention and has to be factored into any licensing agreement. Both conditions should be put before your employer with a demand for appropriate compensation. The 50% PTO fee rise is easy to identify. Essentially, it your employer AND its affilliates, home office, etc, ie everything under a holding organization, is not a "small entity, (35usc200, 201, 15usc632)", essentially, but not only, under 500 employees including temporaries. --- still under construction --- ======================================================================== II. COMMENTS ON PATENT ATTORNEY PRACTICE Common problems with Patent Attorneys: 1. They have no interest in helping you be successful in your business except for processing a patent application. There is no will be no effort to help you conserve your working capital. 2. Some attorneys dawdle in making responses to PTO office actions then have the audacity to charge the extension fees to you. This is clearly an unethical practice, but very common. 3. Patent Search costs out of line with value. 4. Patent Search of the wrong art. 5. Some attorneys insist on preparing finished, high quality drawings for the application. The application can be submitted with far less formal drawings at much lower cost. If the application results in a patent (which is not assured) then the drawings can be polished to the required finished standard. If no patent, your money would have been wasted, and the attorney would have collected a larger rake-off for nothing. 7. Inappropriate use of Provisional Applications 8. Like drawings, a Provisional Application does not have to be a polished work. It MUST be complete. If it is not, it may be worthless. 9. Double charging. The work preparing a Provisional Application is 100% transferable to a regular application, and fees should reflect this. Notes: Searches and drafting are usually jobbed out to contractors. In most cases, you can do them yourself. Control the cost of a patent search carefully. A. Is the search directed to the innovative part of your invention, ie, to that part which will be described in the claims. Any other search is worthless. B. The search process reaches the point of diminishing returns rather quickly. Know when to stop. C. The patent application fee includes a search by the PTO. This is the search that really counts. The pre-application search needs to be controlled relative to the application fee plus the cost of preparation of the application. What is their mark-up on the search? Either do part or all the search yourself, or contract directly with the search firm. What is the cost of patent drafting? Do they want to submit finished drawings? It is a common practice of attorneys to insist on high-cost high quality drawings up front for the application. This is not timely use of your money. Again, drafting is not difficult and you should consider doing it yourself or contracting directly with the drafter. The application does not need finished drawings. They must meet certain informational and format requirements, but they may be rather crudely done. The PTO will give you a report of what is deficient in form. Ultimately, when or if the patent is passed to issue, new quality drawings must be submitted. You can write most of the specification, and certainly the background and summary paragraphs. The filing fee for a small inventor is $385. You can completely botch your application and have to re-file for another $385 10 to 20 times and not be as costly as the usual attorney fees. This is not recommended, but shows the relative values. Actually, it may be a good idea to pass your do-it-yourself application past an attorney or agent for comment and clean-up. Especially the claims. Also, the Patent Office has to be nice to the pro se applicant and is required to give them constructive help. The Office has no such requirement for attorney represented applications. One practice is to use a patent agent or attorney for guidance, file it yourself, then return to the expert when the PTO responds with its usual negative comment. There seems be no advantage in having PTO mail sent anywhere else than your own home or office. Disclosure Documents The PTO will file and retain your invention disclosure for $10. A disclosure document is your best method of concisely communicating your idea to the attorney. The very act of writing it straightens out your thinking. When practical, the disclosure should be written in patent application form and it can serve as the first draft saving lots of money in attorney fees. There are other subtle uses for preparing and filing a disclosure document, but no attorney will tell the secret. Your attorney will offer to accept your disclosure and "save you the $10". But, what does he charge? Also, if you want to use another attorney, your disclosure is in the first attorney's office. Disclosure documents can take the place of, or securely record, lab notes, especially when the lab notes are not in preferred binders' format (sewn binding with pre-printed page numbers). loose leaf pages and spiral bound notebooks are always viewed with suspicion. Submit signed copies with the Disclosure document. A disclosure document is optional and is of less value if the filing is shortly after the invention is complete. You can piggyback more than one invention into a disclosure. Provisional Application A provisional Application is a more complete disclosure document filed for $75, but has several advantages: 1. You can mark your product "Patent Pending". 2. You get an application filing number, filing date, and a foreign filing license. This preserves your right to file for foreign patents in most countries which bar filing if the product is sold prior to filing. If the regular filing is to be made in a few days, there is very little value in filing a $75 + atty fee provisional application. Even though a regular filing is imminent, occasionally, a provisional is useful as the best way to immediately secure protection from various legal problems such as a bar date approaching, aceing out a potential competitor, you need to mark your product "Patent Pending" immediately, "Patent application filed" status may be a valued tool in some business merger or sale situations. ---- end attorney gripe ---- ========================================================================== III. YOUR BANKER IS NOT YOUR FRIEND The old admonition to cultivate a relationship with your banker so that when you need him, he will know you and you can talk sense, cents, and dollars easily. NO more. In these days of roving executives, mergers, sales, takeovers, and other disruptive things that happen all too regularly, there is not even a vague promise of continuity between you and your banker. Worse yet, Authority is being withdrawn from the person you face in the bank and now generally resides with the out of state "head shed" (in California??). In short, your resident banker might not even be able to keep whatever promises he made in the past. As bad as the above may appear, it is nothing compared to what can happen if your bank gets into trouble, Or the home office gets into trouble and pulls the plug on the local branch. Most business loans can be called at any time without notice or cause, even if not in the arrears. Also, most business loans are tied one way or another to other accounts with the lending bank. Lenders usually request (or require) that you do your other banking with them. This is not just a simple grab for your business account, but setting you up so that if the loan is called, the cash accounts are raided also, leaving the business without operating capital. Modern bankers are formula people. It is preferred that an account be bankrupted and therefore a legal unavoidable default rather than having to make and defend a decision to restructure the debt. *note 1* What to do? Open whatever operating account is required, but don't keep any significant amount of assets there. Keep your ---> PERSONAL <--- and business cash in other banks. Probably the best account to fulfill the lender's request is the company checking account, and refill the account as checks are written. Your account is vulnerable during the float time between deposit and when the checks clear. So pay the important (taxes, payroll) and larger bills with cashiers checks which have no float. (Cashier checks preferably from another bank). ------- *Note 1* To Wit: The Mexican debt could have been paid off rather easily and in a fairly short time if the banks would apply the payments to the principal first and perhaps forgetting or delaying the interest portion. No, The banks insisted that the debt be re-structured with any unpaid interest being added to the principal, increasing the interest due. The debt could never be repaid with ever increasing interest payments. What did they do then! The US government was pressured into pushing Mexico about and causing a major monetary crisis and Depression. (the same thing happened to Poland also). Then, in the case of Mexico, Clinton "found" some money and gave it to the bankers. --- end, banker --- ========================================================================== IV. YOUR AD AGENCY CAN PRODUCE A PROGRAM THAT IS A TOTAL FLOP, YET BE ECSTATIC ABOUT IT. "art(?) for arts sake, on your nickel" how sweet it is to have someone else pay for your hobby How often have you seen an ad and not known what is being pitched? How often have you seen an ad that the pitch seemed to be for one thing, when upon closer inspection it was for something entirely different? How often have you seen the rare presentation that is so good or interesting, that the message and product being pitched is overshadowed and obscured? How often have you seen a TV or radio ad that was too raucous, flashing images, unfocused, repetitive, that it was worth a quick hit of the channel change or mute button. How often have you seen an ad that appeared to be causing pain or discomfort to children or animals, sassy children, stooopid fathers, crass businessmen, apparently displaying disgusting behavior, misuse of food, etc., the list is almost endless, ... ? How often have you seen promos for adult late night TV drama on during daytime hours using the very scenes from the show that put it into the late night category? How often have you seen promos for TV drama featuring frenetic ethnic activity and/or bad grammar, or any of the previously described faults?? Trashy, ineffective advertising is everywhere. Add your own experience to this list. In Conclusion You cannot trust the arts community to exhibit common sense generally. Do they really care if your money is wasted? It is even less likely that they will understand your business requirements or your customers. When reviewing ad copy, especially TV copy, remove your connection to the ad and examine what message, if any, is likely to come through. Is it compatible with your ethics and goals? Warning flag: The producer is excited about his work, especially about the "artistry" or cleverness. Pedestrian, even if effective for the purpose, ad copy is boresville to the arteeest. --- end ----- NOFRIEND.TXT a
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