Archive for December, 2007

Vale Think Secret

December 21st, 2007

Apple announced that it has settled two-year old litigation over Apple rumor blog Think Secret’s publication of information about the then-pending release of the Mac Mini computer. Some pundits have expressed concern that the settlement involves closing down Think Secret’s site, and that this may set an unhappy precedent for other blogs.

That worry seems a bit overblown to me- being put out of business by a big-guy litigant is an ever-present risk for little guys everywhere. Just because it happened once doesn’t make it any more or less likely to keep happening.

What I found interesting in the case, in light of my earlier post about trade secrets, is that Apple initially brought suit claiming trade secret infringement. I.e. that the existence of and Apple’s plans for the Mac Mini were not-generally-known information with economic value that Apple had taken steps to keep secret. The court disagreed and held that the information did not constitute a trade secret.

Here’s another difference between trade secrets and other types of IP, then- a party has to prove to the court first that it owns a trade secret, and then that the secret has been improperly disclosed. Patents and trademarks are registered through processes in front of Patent and Trademark Office attorneys, not by a judge or jury.

It isn’t immediately clear to me if this is a positive or negative attribute of trade secrets. It may be as simple as pay now (for patent or trademark registration) or pay later (when trade secret litigation comes up). Depending on how complex the topic is, I can see a USPTO examining attorney reaching a different conclusion from a judicial factfinder (judge or jury) about whether certain information is proprietary. At the least USPTO precedents and procedures are a bit better mapped so the outcome may be a little more predictable. Banking on a court to uphold a trade secret requires an extra roll of the dice.

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I Can Understand a Patent and a Trademark, but How the Heck do Trade Secrets Work?

December 20th, 2007

Trade secrets are a deceptively simple idea: like the fabled Coca-Cola formula, they are proprietary ideas that have never been shared. Because they are “secret” they are entitled to intellectual property protection.

But what does that really mean, and how does one keep something “secret”? Clients ask me this with some frequency (hm- $30k to obtain a patent that I then need to spend more money to enforce, or $0 to keep a secret?) and I’d like to share some of the basic concepts. There are some excellent “deep” resources out there, so I will focus on the common questions I get from clients.

What is a Trade Secret?
Under California law, a trade secret is (i) information that (ii) has economic value, (iii) is not generally known, and (iv) is subject to reasonable efforts to keep secret. It can be an idea, a process, software, knowledge of ideas that don’t work, and many other things. Essentially it needs to provide an economic advantage to the holder, and steps need to be taken to protect the secrecy. Since efforts to protect secrecy can easily lead down a slippery slope, it is worth noting that extreme, expensive measures to prevent industrial sabotage are not required.

How Can I Lose My Trade Secret?
The one word answer is “disclosure”. Inadvertent or intentional disclosure will both blow the protection. In the latter case damages may be available for breach of secrecy obligations, but accidental disclosure will do the job as well. Workers should be told the information they are handling is confidential, steps should be taken to recover records from departed workers and reasonable measures should be taken to make sure that information is maintained on a “need to know” basis if the secret is a critical one.

It is also worth noting that independent development of the information will terminate trade secret rights. Reverse engineering does not violate trade secret protection laws, and a “hot” idea that is not generally known when developed can become known later and lose protection as a secret.

How Do I Know I am Not Infringing Someone Else’s Secret?
This is tricky. Patents and (registered) trademarks require public filings, so a company can find it if there is existing protected IP in a given area. Trade secrets are secret by nature, so it is entirely possible that one could develop technology that inadvertently duplicates someone else’s trade secret right.

The answer is, again, that independent development by itself does not infringe a trade secret. The key here is to have enough notes, research records and other facts to back up the argument that one developed one’s information independently and without reference to the competitor’s secret information. In a small field where the players know one another well this may be easier said than done.

Talk to Your Lawyer
These ideas scratch the surface of trade secret law and probably beg more questions than they answer, like “what do I do if someone discloses my secret”, “how can I make sure my employees protect my secrets” and “what are the remedies for theft of a trade secret?” Anyone asking these questions should definitely talk to a lawyer- the answers are too complex and likely depend on specific facts. Still, I hope this gets some people pointed in the right direction with regard to what trade secrets can and can’t do, or at least helps figure out what further questions need to be asked.

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The Social Network Dance

December 19th, 2007

I’ve recently started to receive a surge of invitations to yet another professional social network (which shall remain nameless). I still haven’t figured out how Open Social or anything like it will actually affect life in the real world. Will I suddenly be on people’s networks in lots of places after making one uber-connection? That seems desirable and undesirable at the same time.

Still, I know this. I checked out the social network for which I am currently receiving invitations. I can’t figure out if it is useful or not. However, I do know that building my “social graph” on any network is time-consuming. As a result I am accepting these invitations on the off chance that the network turns out to be valuable someday. Is the alternative to Open Social just to be “easy”?

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How to Make a Splash and Ruin Your Career at the Same Time

December 18th, 2007

Being at the top of any field is incredibly difficult- impossible, really, for all but a select few. The people who do work at the top generally spend years toiling away in the trenches building their credentials before they get recognized for their efforts.

That’s why it’s even more amazing when a complete outsider is able to step in and make a significant contribution to any field. Albert Einstein may be the best example anyone will ever come up with for this- he famously worked as a patent clerk while developing his special theory of relativity.

A backlash against upstart outsiders is also to be expected. When everyone else has to put in time and years deep in the field, how is it possible for an outsider to step in and contribute at the highest levels?

All of this, plus an interest in cosmology undeterred by (or because of) my poor math skills, explains why I find the story of Garrett Lisi so interesting. Lisi holds a doctorate in physics, but divides his time between surfing on Maui and snowboarding in Tahoe. Along the way, he claims to have developed a simple “theory of everything” to unite classical physics with quantum mechanics (it is based on the “E8” mathematical concept represented in the picture). It’s a bold claim- scientists have chipped away at the idea for decades with few testable theories to show for it. The person who eventually does crack the code will probably end up on a pedestal together with Isaac Newton and Einstein himself.

Lisi’s paper received both praise and criticism, as befits an audacious claim by an unknown scholar. I certainly can’t say if he is right or wrong. The business lesson I take from it, though, is that grand claims may be easy to make, but require extraordinary proof. If Lisi turns out to be wrong his career as a physicist will probably be over before it ever really started.

I prefer a simpler mantra I picked up from an old mentor: “underpromise and overdeliver“.

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New Cycle Capital Having a Go at Multiple-Bottom-Line Investing

December 8th, 2007

New Cycle Capital is a new venture firm with a mandate to make money while investing in the “green economy” and underserved domestic markets. This is an area I find fascinating because it is such an intricate dance; some of my earlier thoughts on it are here.

Companies focused on a single, economic bottom line really have one big thing to think about- making money. Companies that adopt a triple bottom line approach or some variation on it are juggling almost by definition to find a profitable business that supports the non-economic goals.

I think most companies can’t really put that off very well, which is why they settle for making money in one arena and using it to do good in others. Investment funds run much the same way. The Omidyar Network, for example, cites a commitment to “creating opportunity for individuals to improve the quality of their lives”, but a quick look at its Portfolio page shows a split between for-profit and non-profit investments.

Pacific Community Ventures is a $60M family of funds trying to do things differently. Part of their mandate is that portfolio companies employ a portion of their workforces in low/moderate income communities. They invested in Timbuk2, whose bags are made by just such people in San Francisco.

The fact that PCV is not a household name may suggest that this area is a hard-to-serve niche. I’ll be watching New Cycle Capital as another entrant in the field, and hoping to see more funds taking similar approaches.

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Important Perks of a New Job

December 7th, 2007

It has been an established principle since the U.S. Constitution was adopted in 1789 that the U.S. government can’t be sued. It’s an old rule called sovereign immunity that predates the U.S. by a long shot. It means, though, that if you don’t like something the government does and believe it is violating your rights, you have no legal recourse.

In many countries that would be the end of the story (and historically was). Fortunately some intrepid lawyers figured out how to get around that. Instead of suing the U.S. government itself, people decided to sue the person holding the job. The government indemnifies the person against claims, so there is no actual personal responsibility, but seeing one’s name frequently in the court docket is part and parcel of top-level federal government jobs.

Michael Mukasey was sworn in as U.S. Attorney General on November 8 of this year. I get a summary of significant court decisions every day, and in the last week or two I have started to see a bunch of cases reported under the headings “____ v. Mukasey”.

That didn’t take long, and I suppose points out what an elaborate fiction the whole thing is. The cases probably started years ago as “___ v. Ashcroft” or “_____ v. Gonzalez”, but got changed as the Attorney General position changed hands.

I am sure Mukasey was ready for it, and that kind of attention probably seemed ok compared to the scrutiny around his confirmation hearings. Still, it doesn’t seem like much fun to be sued 200 times a year.

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Not Ready for Sharing

December 6th, 2007

I was pleased to see Facebook do the right thing by letting users opt completely out of Beacon.  From the uproar it seemed clear that the world just wasn’t ready for that level of sharing.

Social networks make it really easy to share, but sometimes users want to keep things private, and making sure that certain information doesn’t get out can be easier said than done.  Case in point for me was an experience I had last week.  A couple I know, both avid Facebook users, separated.  I found this out when I logged in one morning to find that both had updated their relationship status.

I sent them a note and one responded that she had tried to keep things quiet by removing relationship status from her profile entirely, but forgot that the change itself would go into her news feed.

I think there is no way out of this.  From what I can see, I can change my relationship status or I can remove the status from my profile entirely, but either way the action goes into my news feed.  In other words, there is no way to choose not to share that information without telling my network that I’ve stopped sharing.

The lesson here for me is that once I have opted in I may not be able to opt out without bringing more attention.  Trying to close the barn door may itself let the horses out.  This is good to keep in mind.

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The Bubble Song and Why it is Going to Drive me Crazy

December 6th, 2007

VentureBeat linked to a really clever video parody of the current web scene, linked below. I watched the whole thing, which is rare for me. The thing that is driving me crazy, though, is that I can almost, but not quite, place the tune to which the lyrics are set. If anyone can help me out please put a note in the comments.

Update: about 20 second after posting this I figured it out.  The tune is Billy Joel’s We Didn’t Start the Fire.  I feel much better now.

[youtube fi4fzvQ6I-o]

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The Merits of Non-Compete Agreements

December 4th, 2007

Yesterday morning I tuned into a blog conversation principally between Bijan Sabet and Fred Wilson on the merits of non-compete restrictions- mandating that employees not compete with their employer in outside ventures.

Bijan says that companies should hew closer to California’s rule, which is that an employer can’t prevent someone from working, but can stop the person from using confidential or proprietary information of the first employer in the service of the second. Fred takes the position that non-competes should be allowed, but the employer should be required to pay the employee for sitting on the bench.

It is a fascinating topic. For the record I agree with Bijan (no surprise from a California lawyer). Focusing on the mere fact of employment is a red herring. The focus should be on what the employee does, not where s/he works.

Fred offers an example where brandishing a non-compete helped prevent the VP of Sales in one of his portfolio companies from jumping to a competitor. With all due respect, this example doesn’t prove that an NDA restriction would not have gotten the preferred result, just that the non-compete agreement did so.

What really puts me in Bijan’s camp on this is that I have worked with a number of entrepreneurs coming from large companies. Almost without exception their short list of important questions in the inital meeting includes “can I do this without [prior employer] suing me for breach of NDA obligations?” The California system seems to work. I have yet to see a reason that more restrictive requirements are needed.

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