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William Carleton, Counsellor @ Law
Average of 12 posts per month.
March 11
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10:11 AM
Have you noticed a slate of stories in the news lately about blogging fatigue? For example, here and here. Some of the stories talk about how time consuming it is to blog (as opposed to micro-blog on Twitter or Facebook) on a consistent basis. Though not fatigued by any means, Fred Wilson and Glenn Kelman have also blogged recently about some drawbacks to being publicly overexposed, suggesting that zones of privacy might sometimes be appropriate and even efficient. It might be reaching too far to say that there is a reassessment of personal transparency in the air, but it is interesting. Around the same time, Mark Suster published a long post explaining why and how to blog, and even what to blog about. It's very nuts and bolts. He even shares his production method, down to the time it takes generate a typical post, and his thoughts on building a backlog of posts. Mark is pro blogging, for sure, but his post is not a "rah rah, everyone's doing it, let's all jump in" promo piece. Just a non-patronizing, relatively sober and practical "why" and "how-to." I am slightly out of sync with all of the above as I am yet in the mode of discovering the unexpected joys of blogging. And I have a post about this, too, of course. I wrote it last week, but am holding it in reserve to publish at the end of the month, on March 28, the anniversary of this blog. In the meantime, however, I want to share a self-discovery that occured last week after I clicked on a link to an article from a major periodical. Not more than a paragraph into it, I realized, holy sh*t, this thing is written like a magazine article. And for the first time, I was conscious that my prejudices had shifted. That is, instead of imbuing the article with credibility because of the brand banner under which it was published, I was skeptical, for the lack of accountability, lack of a genuine voice, the traces of oversimplification and a condescending, affected tone of authority. For the first time, I was fully conscious of a new predisposition, newly wired, that if one really wants to know something, one is going to have to start by finding those in the know blogging about it.
March 10
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09:56 PM
March 8
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06:38 PM
 Editor's note: This is a guest post authored by patent attorney Micah Stolowitz of Stolowitz Ford Cowger LLP. Micah explains how Apple was able to receive its iPhone “TUI” (US Pat. No. 7,479,949) in less than a year under the Patent and Trademark Office's "Accelerated Examination" program. The iPhone “TUI” patent is among many that Apple is suing to enforce, in a move widely seen as an attempt by Apple to thwart Google's ambitions in the phone market.
How did Apple get a patent in 10 months? Wait a minute! Everyone knows the PTO has a huge backlog of
patent applications (well over a million last I checked). And everyone knows that in IT/ Internet and
software related technologies, it takes something like three to six years to
get a patent granted. OK, how did Apple
file an application on the iPhone touchy user interface (TUI) on April 11, 2008
and receive a granted patent on January 20, 2009, less than 10 months later? Political influence? No, it’s called Accelerated Examination, and
in that program the PTO actually is granting applications in under a year. The PTO Accelerated Examination Program. The Acclerated Examination
program FAQs are here. Briefly, the AE program
requires an applicant to conduct a thorough search of the prior art, and then
cite to the PTO, “any reference that establishes, by itself or in combination
with other information, a prima facie case of unpatentability of a claim” of
the patent application. - Applicant
is required to cite the reference that discloses the most limitations in the
independent claim.
- Applicant
is required to cite any reference that discloses a limitation of an independent
claim that is not shown in the other references.
- Applicant is required to cite any reference
that discloses a limitation of a dependent claim that is not shown in the other
references.
The Accelerated Examination Support Document (AESD). And here's the clincher: "For each reference cited in the IDS of the
AESD, the AESD must include an identification of all the limitations in the
claims that are disclosed by the reference specifying where the limitation is
disclosed in the cited reference. The
AESD must also include a detailed explanation of how each of the claims are
patentable over the references cited with the particularity required by 37 CFR
§1.111 (b) and (c).” (As an example, the AESD for the Apple iPhone "TUI" patent, followed by the patent application itself, is here.) Applicant Does the Work.
Thus, under this program, the applicant conducts the prior art search,
provides the detailed search report, identifies the closest art, applies the
closest prior art to each claim limitation, and then demonstrates how each
claim is patentable over that art. In
other words, the applicant carries
out the examination before even filing the application. This is why most patent
practitioners advise their clients to avoid this program. Practitioners are loathe to fill the record
with all these admissions as to the prior art, and how it applies to their
claims. Only a few thousand applications
have been filed under the program (see below), out of several hundred thousand total applications
filed over the past few years. The PTO thinks this fear is
misguided (or exaggerated). One person I
spoke with at the PTO pointed out that the AESD is presenting facts, not
conclusions of law. That line can get
blurred however, especially in litigation. Still, some of my clients, for certain applications, would rather take that
risk than wait five years to get a patent. They are not alone, as the number of petitions for AE is on the
rise. After the Petition for Accelerated Examination is
Granted. If the applicant meets all of these requirements (and
some others) (and the PTO is very exacting on these requirements), then the
petition for accelerated examination should be granted. This initial step takes about two to four
months, depending on the technology center. After the petition is granted, the applicant can expect not the usual
“official action” (rejection), but instead a telephone call from the assigned
examiner, within a month! The examiner
is to point out and discuss what issues need to be addressed in the case. An amendment to the claims may follow, and if
agreement was reached, a Notice of Allowance comes back shortly
thereafter. Even after spending the
initial few months deciding the petition, the PTO still aims to finish
examination with one year, total, from filing. Here are some statistics. Of 2811
Petitions filed through 12/31/2009, 76% or 2131 have been granted so far (including Apple’s petition), and 10%
have been denied. Note that refers to
the petitions for accelerated examination, not allowance of patents. The (cumulative) statistics
also show, for those 2131 applications undergoing AE, 23.8% are still pending,
17.7% are abandoned, and 1246 or 58.5% have been allowed. That compares to an overall PTO allowance
rate somewhere around 42%. An allowance
rate of 42% was reported for the first quarter 2009. The graph
below is from here. 
March 5
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09:15 PM
I've been critical in recent months about what in my opinion were the misplaced legislative priorities of the National Venture Capital Association. Well, I now happily withdraw that critique. The NVCA has put its logo, and its President, Mark Heesen, has put his signature, on a letter to Sen. Christopher Dodd, the (now lame-duck) Chairman of the Senate Finance Committee, asking that federal preemption of state regulation over Reg D "accredited investor" offerings be preserved, and expressing concern over a precipitous increase in the accredited investor thresholds. The letter was a joint effort of the NVCA and the Angel Capital Association, whose Executive Director, Marianne Hudson, also signed the letter. Legislation to end federal preemption over "accredited investor" offerings was introduced last year by Sen. Dodd. Not that the issue took center stage in the bill that was introduced; the attack on Reg D surfaced in just a few lines within a bill whose ostensible purpose was the comprehensive reform of the nation's financial regulatory system. Nevertheless, pertinent language in that bill would end federal preemption of the ability of states to regulate private securities offerings that are exempt from registration requirements by virtue of Rule 506 under Regulation D. It may be the case that Sen. Dodd's original bill is no longer viable, given the Obama administration's endorsement of the Volcker rule and other refinements to administration proposals for financial regulatory reform. But the NVCA and the Angel Capital Association, at least, would appear to think that the issue is still timely, and I have presupposed that Senator Dodd's next bill might well recycle the Reg D and accredited investor threshold provisions of his initial bill. (Google research note: Senator Dodd blogged this week that his legislative efforts are alive and well.) I became aware of the NVCA/Angel Capital Association letter through Jason Mendelson's blog. Jason posted this week that he knew that the NVCA had taken a position, and in the comment stream to that post, Marianne Hudson of the Angel Capital Association responded to a comment I had made with a link to the letter. I mean to connect with Marianne and compare notes; she may know the current status of the attack, whether it remains in the earlier bill, or whether it has been reintroduced somewhere else. (I should also mention: I had a background conversation with a prominent state securities regulator recently, and he told me he believed there was a House counterpart to the language in Sen. Dodd's bill. He could not identify it for me, however, and I have not found it yet.) Tremendous credit for raising consciousness on this issue has to go to Marcelo Calbucci and Seattle 2.0. Last November, Marcelo invited Joe Wallin and I to author a guest post to publicly announce a letter that some two dozen entrepreneurs, angel investors and attorneys in Washington State wrote to Senator Patty Murray and Senator Maria Cantwell about the importance of angel financing. Amazingly, neither Senator wrote back; but the Seattle 2.0 post made that letter available publicly (in fact it is quoted in the NVCA/Angel Capital Association letter). Fred Wilson also blogged about the issue in a post about public policy priorities for venture capital, and I know this caused some VCs I have spoken with to realize that this was not simply an "angel issue." And Jason Mendelson blogged about this back in November when one of our group notified him of the effort in Washington State. I have no idea if we'll be successful, but it's pleasing to see the effort going national and including more of the startup ecosystem. Final note for this post: at the 30th Annual Northwest Securities Institute put on by the Washington State Bar Association, I had the opportunity to ask (publicly) a question of Michael Stevenson, the former director of Washington State's Securities Division, about whether it was true or not that all the cases of abuse and fraud that state securities regulators worry about involve broker dealers or placement agents (and thus can be distinguished from the kinds of angel financing that is typical in the startup community). He answered that in his opinion that was not the case. I go back to the conference in the morning and may try to collect my notes on his additional remarks, for a follow up post.
March 5
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09:26 AM
Vivek Kundra, Federal Chief Information Officer of the United States of America, is an impressive guy.
He was in Seattle yesterday participating in public and private events that Todd Bishop and Marcelo Calbucci cover here and here, respectively.
I was able to attend a public event on the University of Washington campus, and have a few impressions to share, in the general category of style-as-statecraft. The CIOs of federal agencies focus on the wrong things, Kundra said. Instead of concentrating their time and resources on improving user (read, "citizen," or "taxpayer," or, to extend the metaphor even a bit further, "stakeholder") experience, federal agency CIOs distract themselves -- and waste taxpayer dollars -- by building siloed data centers. It gets worse: Kundra thinks federal agencies do not adequately leverage best industry practices and that they miss opportunities to improve processes. One example: at the Patent and Trademark Office, federal employees print out patent applications that are submitted online, and manually key them into an antiquated computer system. The standards Kundra would have the federal government set for IT are commercial ones. To symbolize this, government IT projects are going online. Pictures of agency CIO's, he said, are being posted next to the IT projects they are responsible for! Kundra talks as if it's reasonable for the taxpayer to bring a tech consumer's quenchless thirst for innovation and access to her expectations of government. Getting real time text alerts when your application status changes, or comparing the response times of different regional offices performing the same function -- those are simple examples of how the government might emulate online commerce. Marcelo is a better judge on his substantive qualifications, and Todd moves more deftly to the implications of Kundra's policies (government meets cloud computing) for industry, but take it from me that this man has his messaging down. It's disarming, to hear the guy billed as having the mandate of the POTUS say government should be as accessible as a social media site. We're on your side, Sir! Does the IRS have an iPhone app yet? Our nation state has a President but no CEO per se. Kundra, however, has a C-level title. Think of him as working for the United States of America, Inc.? 
March 4
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02:28 AM
There are some thoughtful comments -- from lawyers! -- on Fred Wilson's post of yesterday on the various sets of seed funding documents now available on the Web. Fred lists four sets, and the comments identify others. But my conviction after reading Fred's post and the comment stream is this: it almost doesn't matter what forms you start with. The point is for the entrepreneurs and investors to understand what the forms, whichever they choose, actually say. Here's an excerpt from a comment by lawyer Brendan Davey: "In practice, none of these [open source] forms are ever a satisfactory representation of intent of either side in a transaction, but are a good place to start. As Fred stated in [the] post, there are just some issues that an entrepreneur or VC, once they realize what they are giving up, will want to be handled differently." That was followed by an equally good comment by another lawyer, Dan Lewis, who concluded: "The goal is not to standardize, but to demystify and make non-scary/inexpensive for the entrepreneur. Standardization fails because it's lazy and, in the end, does not actually accomplish those goals." Not sure I agree with Dan that standardization, as such, is bad, though I totally agree with his point that the documents must be understood. On reflection, I wonder if we should think of "standardizing" as the goal of having very standard, boilerplate provisions that can work like modules. So that, for example, if you encounter something nutty in one of the sets of forms that addresses the vanity or political needs of the promulgator or sponsor of that set of forms, you can replace or repair that bit with a well-milled piece from a master set. In point of practice, there are such pieces floating around that lawyers recycle, but it would serve entrepreneurs and investors better if these were transparent. Such pieces would be further "standardized" when a plug-and-play tool would let you build documents from them (perhaps such a tool could be an extension of one of the term sheet generators). Housekeeping: I stand down from my earlier declared ambition to mark up and simplify the NVCA form for purposes of a seed equity financing. I learned from Dave Broadwin's blog that Ted Wang will be making available "model seed series financing documents" (amazing what you can learn, not just from comments, but from following the links that Disqus supplies to the commentators!). I'll wait to see those Ted Wang templates, and hope to find they work well enough. Because the insight now to test is that any form is as good a place to start as any other. :/
March 2
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07:17 PM
Large social media vessels are picking up speed, displacing water in such volumes that even those in the shallow periphery (indifferent to Twitter, Foursquare and the like) will be sucked by the wake into the middle of the lake. It seems the social graph is now being mapped by all the big players, including Google, Microsoft, Facebook and LinkedIn. For Google, borrowing a bit too plenty from the hive of Gmail to launch Buzz was not the half of it. With social search now on the ubiquitous Google search page, core search functionality will become ever more personal and relevant. (And, whether or not Google intends this, advertising will become ever more superfluous and irritating.) Microsoft, too, would appear to be ready to turbocharge its flagship office productivity product for another generation of relevance: note this company post from last month that the heretofore sacrosanct Outlook (imperfect, but admittedly the de facto professional CRM for many of us) will embrace and enable what looks like the social graph. (To date, in my experiments at least, Gist and the LinkedIn Outlook plug-in have performed like grafts that the main body won't quite accept.) When it’s understood that office productivity is an extension of social networking, everyone will be doing it. It may be one of those things society adopts virtually overnight. In the back and forth drama over privacy, keep the following in mind: sometimes people use "privacy" as code for compartmentalization, or selective disclosure. We all use walls, to greater or lesser degrees, to protect ourselves from what we perceive to be the ill effects of information transparency. But as with most adaptive or adopted behaviors that are based on fear, we will end up happier when we let it go. Why do I say "what we used to call Twitter," presupposing that Twitter will not survive? Alas, from published reports, it would seem that Twitter means to chase advertising dollars, and that will inevitably mean that Twitter will become an upscale Facebook. The true social graph is inimical to advertising. (To adapt an example from the Google social search explanatory video, when you are able to search the experiences of those in your social network who have recently traveled to Zürich, you won't want to hear what an airline or hotel chain have paid someone to say about it.) With a logic and a purpose that defies antiquated 20th Century business models (and sometimes even management intention to perpetuate the past!), software engineers at companies small and big are taking us to a world free from advertising.
March 2
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09:12 AM
As part of a package of taxes being considered today by a Washington State legislative committee, the current exemption of custom software from Washington State sales tax could be eliminated. According to a House Democrats summary, the total package of taxes would generate $758 million "for the remainder of the 2009-2011 biennium." (Washington State operates under budgets that cover two years.) According to the itemized projections in the summary, $76.5 million, or fully 10% of the total revenue targeted, is projected to come from elimination of the sales tax exemption for custom software. "Custom software" is defined in Washington State regulations to mean "software created for a single person," and may include "the use of library files, as long as the software is created for a single person." ("Person" is understood to include corporations and other entities.) Other revenues are projected to come from extending personal liability of corporate officers for unpaid B&O tax (projected to raise $6.2 million in the 2009-2011 biennium), and from applying B&O tax to fees board directors receive (projected to raise $2.1 million in the 2009-2011 biennium).
February 28
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05:06 PM
It's too early to find a pattern, but in Episode 2 of Entrepreneur's Prior Lives, Michael Cann treats us with the same candor Joe Harb showed in the rollout episode a week ago. Mike is the CEO of (>CLT) TapDynamics, Inc., a San Francisco-based company and the leading provider of draft beer monitoring solutions for multi-unit bar and restaurant operators. (Did you know that "20 to 30 percent of all draft beer poured at a restaurant is never paid for?" See this article.) But before Mike brought data capture and analytics to draft beer flow meters, he was an investment banker, working for Banc of America Securities. For a time, Mike also worked in a San Francisco office for Seattle-based Cascadia Capital. Here's what Mike tells us in the podcast, about investment banking and about himself: - he gave up early on pursuing a career in sports broadcasting
- he turned a temp job into a Vice Presidency at Banc of America Securities
- an investment banker will never have the passion of any CEO he or she works for
- the current controversy over Wall Street pay is misguided
- divorce and single-fatherhood have focused his entrepreneurial energy
Entrepreneurs’ Prior Lives is produced and edited by John Solit. Burgess Carleton wrote and recorded the theme for the series. The Mike Cann episode was recorded in Seattle last Thursday.  Pictured: Michael Cann and EPL producer John Solit.
Disclosure, and a solicitation: Joe Harb's and Mike Cann's companies, Quu and TapDynamics, respectively, are clients of mine. I'd like the series to also include entrepreneurs for whom I do not work as a lawyer. Please send me any suggestions . . . or volunteer yourself!
February 23
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06:50 AM
Okay, this post is totally for language geeks who love the visual play of text on a page or screen. (If I didn't just describe you, you're excused, and I'll see you next post!) Here are the rules of the redlining practice I follow and espouse: 1. Redline only text that is actively in play. If language proposed in the other party's redline works for you, "mark" that fact "negatively" by removing the redlining (in the parlance of Word, this is the practice of "accepting changes"). 2. View all text, suggested deletions as well as proposed additions, in the middle of the field. Relegating deletions to the sidelines gives too much deference to proposed additions. Deletions are just as important to view in context. (Confession: I will not review a redline with deletions relegated to the margins. It makes my brain hurt to do so, and I no longer try.) 3. Don't trust Word for redlining. Use DeltaView or another industrial strength comparison app. Unlike Word, DeltaView won't clutter the page with formatting changes and will (ironically, given the name of the ubiquitous Microsoft word processing program) draw your attention only to the words. Formatting changes are best reviewed on a clean page, and need not be redlined. DeltaView also has the brilliance to mark, in a third color, language that has not been changed from another draft, but has been moved to another place in the document. (Choose green to pick up on the metaphor of recycling.) 4. When encountering the deviant redlining practices of others, take the path of least resistance and generate, for circulation, redlines in the formats they prefer. This may sound counter to the other rules, but isn't; you will yet generate and use the true blue redline for your own review. While the art of the redline is the sport of an introvert, deployment of redlines is a trade. Say the other party prefers to see all changes from all drafts marked cumulatively until negotiation is done. Fine; Word generates that kind of mess easily enough, doesn't choke on it like it did in the past. Nothing says you must yourself rely on the deviant redlines you circulate.
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