BEWARE OF SELF-SERVING PROFESSIONALS
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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.
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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.
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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 ---
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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 ----
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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 ---
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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 -----
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