SHARE:
"To Heck With The Patent"
What went wrong? Allina's failure to detail all of his product's features in the patent application; his naivet? in sharing confidential information with a competitor; and bureaucratic error triggered a costly series of battles with competitors and the U.S. Patent and Trademark Office. The business, West Palm Beach-based Meter-Treater, survived; Allina didn't. He died at 42 in 1994. Ed Allina's saga began in the mid 1980s when he moved from California to Florida. An electrical engineer by training, he got a job as a power quality engineer at St. Petersburg-based Florida Power. But Allina's urge to create inspired him to start his own business. "He had been kind of a crazy inventor all his life," says Stan of his brother.
Allina devised a surge protector that could be placed between a residential electric meter and the house, providing a first level of protection for all appliances and electrical devices. He hired a patent attorney and submitted the application in October 1986.
While awaiting the patent, Ed and Stan Allina began marketing the product, finding success selling it to rural electric companies that resold or leased it to their customers. The first year, 1987, Meter-Treater sold about 300 units at $80 to $100 each. Sales rose to about 1,000 units in 1988. Competitors took notice. Allina began talks with a Salt Lake City electronics company about a possible joint venture. In June 1990, Allina got his patent, having weathered an initial rejection and appeal. To his astonishment, though, the Patent Office also granted the Salt Lake City company a surge protector patent a year later. In response, Meter-Treater instigated an "interference," a procedure to determine who first invented the device.
The Patent Office determines whether to issue a patent based on the application's "claims" - descriptions of the invention's distinguishing features. Stan Allina says the Salt Lake City competitor's "claims" detailed surge protector features not specifically mentioned in his brother's application, but present in the product itself. Bottom line: Allina's failure to file a complete patent application opened the door for another company to get a similar patent.
Allina's story became more complicated when he re-filed his patent application, adding new claims to protect his product from still more competitors. The Patent Office accepted the new claims but at the same time rejected a re-issue of Allina's original claims, thus putting Meter-Treater's entire patent in limbo.
Meter-Treater's troubles didn't stop at the Patent Office. Another maker of surge suppression equipment sued Allina's company in 1991. "They said we were threatening their customers with lawsuits, saying their product was a copy of our product," says Stan Allina.
Before the company dropped its suit in 1992, Meter-Treater retaliated with a counter suit for patent infringement. Meter-Treater's counter suit was thrown out in the spring of 1993, and a federal judge ruled that Allina's company continued the suit too long and must pay $570,000 of his opponent's legal fees - or relinquish its entire portfolio of patents.
Resolution came in 1995, a year after Ed Allina died. The Board of Patent Appeals and Interferences vindicated Allina by admitting the federal agency had erred, and the Patent Office reissued Meter-Treater's surge protector patent. That decision, however, came three months too late to impact a federal appeals court's decision regarding the judgment against Allina for legal fees. So Stan Allina paid the $570,000. "It took every ounce of profit and working capital," he says.
Today, the company employs 25 and expects 1996 revenues to top $2 million. Stan Allina's lessons learned: Make sure the patent application is complete and easy to understand. Don't share confidential product information with anyone, even potential partners. Prod your attorney and the Patent Office to work quickly. If you want to take the easy route, get the patent and then sell it.
If he had to do it again, Stan would enter the market quickly and quietly, with massive volume and low price. As for a patent, he says, "To heck with the patent. Just keep looking over your shoulder."
--
Restaurants
Smart Cooking
To make a successful restaurant, it takes more than a love of good food. So Tampa's Small Business Development Center will run a day-long "Restaurantology" workshop for restaurant owners and potential restaurateurs on November 18. Topics include marketing, financing, management, quality control, kitchen design and energy use, all specific to the restaurant industry. The workshop site, the Electric Technology Resource Center at the University of South Florida campus, includes a test kitchen and food service facility with the latest in restaurant technology. The $65 fee includes breakfast and lunch. For more information, call the SBDC at 813/554-2341.
--
Venture Capital
Sales Pitch
It may be every Florida entrepreneur's dream: a room packed with venture capitalists, flush with money to invest in small, growing businesses. In January, the Florida Venture Forum at Florida International University will turn that dream into reality for about 20 entrepreneurial companies, inviting them to make presentations at the forum's annual venture capital conference. Over the past six years, conference presenters have raised $51 million, $7 million from the 1996 conference. For 1997, the forum is looking for companies based in the Southeast U.S. and Caribbean in any industry, at any stage of development, with potential for fast growth. The deadline is October 15 for applications, which can be obtained from Jeanne Becker, 305/446-5060.
--
How To Find A Lawyer For Your Small Business
By Jill DeVlieger
With more than 54,700 lawyers licensed in Flori- da, finding one to handle the legal needs of your small business seems like an easy task - just open up the Yellow Pages and pick a name. But that strategy doesn't guarantee you'll find a lawyer skilled in business issues such as contract disputes, debt collection or taxes.
Get recommendations from business executives and professionals whom you know.
Use lawyer referral services. Local bar associations administer 14 referral services. The Florida Bar Lawyer Referral Service in Tallahassee (1-800-342-8011) handles referrals from areas without a local service. Lawyers participating in the Florida Bar's program charge $15 for the first 1/2 hour consultation; local bar associations charge $20 to $50 for the first visit.
Consult the Florida Bar Journal's annual directory, published in September. In addition to the main alphabetical and geographical listing of all the attorneys licensed in Florida, the issue lists lawyers who are board-certified in 14 areas of practice, including business litigation and tax law.
Research the lawyers on your list before making an appointment. The Martindale-Hubbell Law Directory, a multivolume reference book, contains biographical sketches and a synopsis of the lawyer's practice, often including names of a few major clients. Martindale-Hubbell is available at many large libraries; Florida lawyers are listed in volume five. Biographical sketches also are available on the company's Web site; the address is (http://www.martin- dale.com).
--
And Once You've Found A Lawyer ...
After picking a lawyer, make an appointment for an initial consultation, which is often free or in volves only a nominal fee. At the office, pay attention to the service you receive: Does the lawyer seem genuinely interested in listening to your needs? What articles has he published that deal specifically with small business? Is he on any bar association committees that relate to small business? Is he accessible? Will he give you his home phone number for those after-hours legal crises?
Once you feel comfortable with the lawyer's expertise and the office environment, ask about fees. There are four types of fees: hourly, flat (or fixed), annual (or retainer) and contingency.
Hourly. Just as you'd guess, lawyers multiply the number of hours worked on the case by the rate. Ask if it's variable. For example, is the rate different for office time versus court time? For out-of-state time versus local time? For returning telephone calls?
The average hourly fee in the Clearwater area, for example, is $150, according to the Clearwater Bar Association's Lawyer Referral Service. Lawyers in Miami and other large metro areas often charge higher rates; fees tend to be lower in rural areas and small towns. And in a given area, rates vary with the expertise and experience of the lawyer.
Lawyers charge a separate hourly rate for support staff, work by paralegals and legal assistants. Also, they bill clients for the costs for copying, postage, long-distance telephone calls, court filing fees and other expenses.
Flat fee. There's often a single charge for a specific service, like forming a corporation or drafting a simple rental contract. A lawyer estimates his costs on a typical case and arrives at a set fee.
Annual fee or retainer. Small business owners who need legal advice and assistance regularly sign a contract and pay a set fee on a monthly, quarterly or annual basis. With the retainer, the lawyer handles routine legal matters, like reviewing contracts. There may be additional costs for special services, such as an unanticipated court appearance.
Contingency. In personal injury cases and some employment law cases, such as discrimination suits, lawyers often are paid a percentage of the plaintiff's monetary settlement or award.
A final word of caution concerning fees: Once you've chosen your lawyer, get a written fee agreement that spells out the specifics. This protects your interests and the lawyer's and helps avoid unpleasant misunderstandings.
--
taxes
Help Is On The Way
To soften the impact of the minimum wage increase on small businesses, Congress included in the legislation a number of tax breaks, most of which take effect in 1997. "They're encouraging companies to have retirement plans, make capital expenditures and invest in the business," says Joseph A. Epstein, a certified public accountant with Rachlin, Cohen & Holtz in Fort Lauderdale.
New tax provisions include the following:
Increased Equipment Deductions. The amount a small business may deduct for business assets in the first year will increase gradually from $17,500 to $25,000 in 2003. Equipment purchases that exceed those limits must be depreciated over the life of the asset.
Easier Qualification for "Subchapter S" Status. The law will permit subchapter S businesses to have up to 75 shareholders, more than double the current limit of 35. Shareholders, or owners, of subchapter S corporations are allowed to report the business' income and expenses on individual income tax returns rather than a corporate return.
A New Small Business Retirement Plan. Businesses with 100 or fewer employees may offer a new type of pension plan that is easier to set up and administer than a 401(k) plan. The Savings Incentive Match Plans for Employees, or "SIMPLE," will allow workers to contribute up to $6,000 annually to an Individual Retirement Account or other tax-deferred pension plan. Employers will be required to match a portion of the employee's contribution. Both the employer and employee contributions will be tax deductible.
--
Rights of Ownership
The premise of intellectual property law is simple: Whoever invents a product, creates an artistic work or adopts a product name or symbol should be able to exclude others from using, making or selling the item without compensating the author. Sounds simple enough.
But intellectual property questions can create a legal quagmire for businesses. Courts regularly address questions such as whether a company's name and logo infringes on that of another business, what information on the World Wide Web is protected by copyright laws, and whether a company's technology breaches another company's patent.
Intellectual property protection comes in the form of copyrights, patents and trademarks. Some basics:
Copyrights
Original writing, musical works, artistic designs and other works of expression are protected under federal copyright law, which gives the author exclusive rights to use the works. To protect material, simply place a copyright notice on it. The notice consists of the copyright symbol or the word "copyright," the year of first publication and the name of the owner of the copyright. If desired, the copyright also can be registered with the Library of Congress (202/707-9100). The fee is $20. An owner must have registered a copyright before filing an infringement lawsuit in court. Copyrights last as long as the author lives, plus 50 years.
The most volatile sector of copyright law today, particularly for information consumers, involves Internet material. Although copyright laws are vague, it's a good idea to get permission to use photos, graphics, songs and recent articles and writings. "Small companies have to be very careful about material they place on their Web sites," says Terence F. Brennan, an attorney with Maguire, Voorhis & Wells in Orlando. "Particularly with multimedia files, they have to make sure they have the proper licensing."
Patents
Original machines, technical processes or methods, manufactured items and chemical compositions may be patented. Inventors must apply to the U.S. Patent and Trademark Office (PTO) for a patent within one year of when they use the invention publicly, place it on sale or describe it in a U.S. or international publication. The key elements of patent applications are "claims," which describe all essential features that distinguish the new invention. "Utility patents" for inventions with movable parts remain in effect for 20 years; "design patents" are effective for 14 years. For "small entities," businesses with fewer than 500 employees, the filing fees are $375 for a utility patent and $155 for a design patent; for larger businesses the fees are $750 and $310.
Because of the complexities in filing patent applications, the PTO strongly recommends getting specialized legal help. Florida has about 450 attorneys and registered agents with expertise in patent and trademark issues. To find one, call the PTO's Office of Enrollment and Discipline at 703/308-5316, extension 18 or use the PTO's Web site; the site's address is (http://www.uspto.gov/web/attorney/attorney.html).
Trademarks
These are words (such as Winn-Dixie's "The Beef People"), symbols (Blockbuster's torn blue ticket), names (Macy's), packaging (Tiffany's distinctive blue boxes with white bows) and labeling (Coca-Cola's red and white can design) that distinguish one business' products from
others'. Formal registration provides greater protection but, as with copyrights, trademarks needn't be registered to legally protect the owner.
A trademark submitted to the PTO is placed on either the Principal Register, which offers full protection that can last indefinitely, or the Supplemental Register, for marks that may qualify for full registration in the future. The basic fee to register a trademark is $245.
Business Beat - Week of May 3rd
