"Solving technical and marketing problems for companies in the energy and environmental industries."
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-The Freebie- Geoff Dolbear’s Freebie Newsletter - Issue 73 December 2009 -
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…And the value of nothing
My neighborhood Kinko’s has been a valuable asset to my consulting business for many years, both in my old California neighborhood and here in Texas. I have used Kinko’s for copying, printing, and faxing with large or unusual jobs, and sometimes for mailing and office supplies. And, Kinko’s is always available when I am on the road. For instance, when presenting a poster talk at an ACS meeting, I usually prepare my poster at home and take along a diskette for printing at the local Kinko’s.
Several years ago, the Kinko’s chain was bought by Federal Express, another valuable resource. At first the change was seamless, and the local outlets were rebranded “FedEx Kinko’s”. Last month the sign outside the building dropped Kinko’s altogether. They discarded a well-established and recognized brand name with more than twenty years of satisfied customers, ignoring its value. FedEx took a $900 million dollar charge against 2008 earnings making the change (http://www.businessweek.com/innovate/content/jun2008/id2008069_075908.htm).
In Detroit, Ford came very close to doing the same thing. We all remember the debut of the Taurus in 1986, the car designed by the engineers not the stylists. It was a hit, eventually becoming the largest selling US-made automobile, second by a hair to Toyota’s Camry. A lot happened to the Taurus after that, not all of it good, but the car still has an established and recognizable brand name. Now with things tough at Ford, marketing execs moved to jettison the Taurus name in favor of something called the Five Hundred. However, it was not to be: Ford’s CEO Mulally declared it was foolish (he probably said something harsher than this) to discard the valuable name of a car that was so successful (http://www.msnbc.msn.com/id/17033668/).
Remember when British Petroleum bought Standard of Indiana, operator of Amoco refineries and stations? The merged company was called BP-Amoco. As soon as the dust settled, the Amoco part of the name disappeared. A half a century of marketing went into the flusher.
Familiar brand names like Kinko’s and Taurus and Amoco are akin to other kinds of intellectual property. It is hard to assign a dollar value to them, but they are nonetheless valuable. Accountants call this kind of asset “Goodwill” (http://www.investopedia.com/terms/g/goodwill.asp), and as such they get an entry on the asset side of the balance sheet, often a very large number. FedEx charge against Goodwill was half a billion dollars. No executive would propose throwing away a half billion dollar physical asset such as a factory or NYC office building, but obviously ego allows them to discard less-tangible assets with impunity.
Strange but true.
Words to Live By...
The most efficient way of doing things is often illegal. -Ben Luberoff
Patents
To those of us who pay attention to patents on technical inventions, these are “interesting times.” The US Patent and Trademark Office (PTO) (www.uspto.gov) is struggling to keep up with rapid changes in various technologies and a changing world landscape, without much success it seems. Congress makes the rules, as dictated by the US Constitution, and as in many such areas, Congress is having trouble keeping up as well.
Some background: The PTO receives many thousands of patent applications from all over the world. Most patent applications are filed by big companies on behalf of inventor employees. (In the US, only individuals can be inventors, and patents are issued to those individuals; if the individuals work for a company, ownership of the patents is usually assigned to the company. In some other countries, companies may file directly.) Many of these applications come from foreign companies, and of course US companies file applications in many other countries. (This is not a process for those short on resources.)
The applications are typically written by attorneys and must be examined by a specialist who knows the technical area as well as the law, responding to the inventor (usually via the inventor’s attorney) with his objections. This process requires the examiner to review issued patents in the relevant area to make sure the new patent really is something new. In my experience, every application gets rejected at this stage, and it is up to the inventor and his attorney to prove that the cited patents, alone or in combination, do not anticipate his invention.
As an aside, people do not show up at the patent office with little mechanical models of their inventions anymore. In fact, it is possible to get a patent on something that has not yet been shown to work. The inventor must, however, describe how to do the invention and the description better work or the patent has no value.
Part of the problem with the PTO is that it has been slow to emerge from the quill pen/green eye shade era of paper handling. They insist on electronic submissions nowadays, but, at least for several years, they printed out the forms and then scanned them back in to their database. This has to do with formatting, I guess, but it sure slows the process to a crawl. Congress was slow to provide a budget to bring them into the electronic era, and they are still feeling the effects. An example – IBM had a free online database for searching issued US Patents several years before the patent office caught up. Now it is possible to search patents quickly and by keyword, but only back to 1976; it is as though there were no inventions worth considering earlier than that. Earlier patents can be searched by number, but of course that means you have to know the answer to get the patent.
Another complication resulted from the decision of the Congress to make the US patent process fit with the way things are done in Europe. That sounds great on the surface, but it changes the rules of operation for many people. For instance, it used to be that a patent went to the first person to make the invention; now it goes to the first inventor to file. Again, having a good financial backer is very useful in active fields.
Examination takes a lot of work, but as is usual these days, the examiners have a limited time to dedicate to any application. One result of the heavy workload is that it can take several years for a typical patent to work through the process. In one patent I am involved in (US 7452392) the application was filed November 2004 and took almost exactly four years to issue. To shorten this time (and probably to avoid hiring more examiners) USPTO issued new rules a few years ago limiting the size, and particularly the number of claims, of applications. The result was a firestorm of protest, with lawsuits and all that, leading to the withdrawal of the new rules.
Along with this problem, USPTO is also involved in the question of patents on business methods. Believe it or not, Amazon has a patent on its method of selling books over the web! Similar patents have been issued to thousands of inventors over the last decade. In 2008, the US Appeals Court overturned the whole idea (http://www.techcrunch.com/2008/10/30/your-business-model-patent-has-just-been-invalidated/), a decision that has been appealed to the Supreme Court.
For more on how the patent system works, see the USPTO web site (www.uspto.gov).
Book of the Month
Charles C. Mann’s 1491
It is now common knowledge that Europeans arriving in the new world in the 1500s brought along smallpox and several other highly communicable diseases. Over the next 100 years or so, these diseases wiped out a large fraction – perhaps more than 90% - of the indigenous population in the western hemisphere. The next question then becomes, “What did the new world look like before they arrived?” If you are like me, you learned in school that the cultures here were primitive, clearly stone-age, with little to contribute to the world. The correct answer turns out to be rather different from this. Examining what evidence is available, the people here turned out to be rather sophisticated in many ways, not that different in cultural advances from the people of the old world. An appreciation for just how sophisticated can be gathered from reading Charles C. Mann’s 1491, subtitled “New revelations of the Americas before Columbus.”
A feeling for the effects of smallpox and other infectious diseases in the new world can be gotten simply from one statistic – the population of the Central American plateau was so badly reduced that it was the late 20th century before it had recovered to its 1491 levels. To repeat, almost as many people lived in the valley of Mexico in 1491 as live there today.
The European invaders saw these people as primitive heathens, who needed to be separated from their gold and silver and conquered for the benefit of the Catholic Church. In addition to astronomy and calendars that were as advanced as those in Europe, the natives had several well developed technologies. For example, Europeans to the contrary notwithstanding, agriculture in the new world was surprisingly sophisticated. For instance, the natives had developed agricultural methods to create a completely new food crop – maize, or what we call corn – from native species that were so completely different that biologists today have a difficult time finding its source among native species. And they developed dozens of varieties of maize, not just the two or three we are familiar with. In parts of Mexico, various corn varieties from those days are still grown in competition today. By similar methods, dozens, perhaps hundreds, of varieties of potatoes were developed in the South American highlands in much the same way.
Europeans tended to look at the locals as very unsophisticated because they did not have the same technologies or sciences that had developed by that time in Europe. In the Andes, for instance, the roads were essentially unusable by mounted Europeans, consisting of large sections of steep steps and narrow passages. They were probably excellent for foot travel and loads carried on llamas, but useless for horses.
As yet another example, the Incas (or Inkas, as they call themselves) had highly sophisticated technologies based on fabrics and fibers, at least equal to those from Europe. The same can be said of their metallurgy, although it was not oriented toward iron. Which was more advanced? The answer depends on your perspective, and we know that the winners always write the histories.
In addition to precious metals, the Europeans took home syphilis when they left. This disease was not a big deal among the natives in the Americas, but it made a real mess in Europe (although not as big as the mess smallpox made among the native Americans.).
Contact:
G.E. Dolbear and Associates, Inc.909-837-8109