Intangibles

Counting Photons, A Fiber Optic Blog, or Flog, on the state of Fiber Optics in Harsh Environments.

December 2008. Cleveland , OH.

2009 is in its waning moments now with Cleveland getting hit by high winds and both bitter cold and record heat (we hit 65 degrees F on December 27 beating the previous record from 1926). Our office is largely closed until January and few if any of our customers are open as the last week of the year in manufacturing is just an extended holiday. Business has been slow but we aren't forcing our employees to take the time off to save costs as even the bellweather tech giant Cisco has done. My guess is that the first quarter of 2009 will be horrible as the decline in business in Q4 2008 makes the news and more companies that used Just In Time (JIT) shipping as well as JITR (Just In Time Revenue) respond accordingly.

The holiday was great even with the changing weather and a lack of a fluffy snowfall on the 25th. Fewer presents than last year was a welcome respite around my house as I think I can get the trash to the street in under an hour this year (I am joking). Kids love unwrapping presents. My four year old actually wrapped presents for himself back in November just so he could open them at XMAS. The thrill of the surprise I guess drove him on as we saw our supplies of tape disappear. Back in November he actually said he would forget what he put in the boxes in a month and coming out of a four year old this was very funny. Everybody loves getting wrapped presents...tangible surprises. And that got me thinking about some of the recent financial reports I had been watching on our customers or other companies in the optics business. They came loaded with tangible surprises listed in their Investments columns but it was the intangibles that I have started to watch.

COTSWORKS is my first company so I'm still learning the ropes about income statements and balance sheets. We've got a great team of accountants to help as well as an excellent intellectual property attorney from Thompson Hine, named Troy Prince. Troy has helped me understand the value of intangibles or what my four year old would not want as a present. One potential present caught my eye this holiday. It's a pig. It's a speaker. It's a…usb power hog. The number of things that can plug into your computer's USB port now and do little but connect other USB devices or create sloppy electronic circuits that heat things or run fans to cool things is starting to number more than the number of Chinese shops that make them. The intangible of this device that separated it from all the other "pig speakers" (search yourself) out there was the patented volume control…go to the features page and you'll see they claim to have patented the idea of pressing the pigs ears to raise and lower the volume. I tried to find this patent…I really did. I could not find the patent but I wonder what it said? Perhaps a "device whose function is the increase or decrease of decibels (dB) through the user interaction of a representative animal's appendage…" Is this really a patentable idea? Copyrights might have been better as you can find virtually the same review and photos without appropriate credit at two different sites, http://www.geekalerts.com/pig-speaker/ or http://www.popgadget.net/2008/07/pig_speaker_wan.php or the one listed in the photo which no longer has this device readily available. They would have been better off just posting something to Wikipedia and letting the world reference it.

Speaking of Wikipedia , it is a great site but as far as tangibles go, do not quote it. Here at COTSWORKS we wrote an SBIR on fiber optic sensors for surface area detection and danced with using Wikipedia for facts. What a mess. When we got into the actual FAA report that was referenced on Wikipedia the facts were totally wrong and overstated; the tangibles became intangibles. And the facts were on the number of bird strikes that hit airplanes each year. Which is really a very tangible thing if you're the plane; the bird…perhaps tangible in the historical sense.

We hope to file a patent on our surface area detection system next year. Patents are something we have been busily working on here at COTSWORKS. We have three we're writing up applications on and hope to do more next year. I'm a bit jaded on the whole patent process, however. When I worked at Apple Computer back in the late 90s there was the running joke about Bill Gates patenting 0s and 1s. Having Apple kool-aid in my veins at the time I thought this was funny. But somebody took this joke way too seriously. Seems that a guy who started a network equipment VAR in Michigan claims he has a patent ( US 7,346,850) on icons launching applications or system processes and is suing Apple, Microsoft and others. Having written some programs in college for Apple's Hypercard, I really wonder what is tangible in this guy's head. Or worse, what was in the examiner's head? We all know Steve Jobs best idea was to visit Xerox PARC back in the 80s so I think there might be some prior art here. How this patent could carve out its niche then go after a broader swath is exactly why the patent process in the US is broken.

Patents used to be a clear cut way of securing your original idea. Now, patent trolls exist to buy up patents and then use lawyers to sue anyone they can to get a settlement on the broadest claim possible. Patents are a big business in optics. Everybody with the ability to think in three dimensions patents optical devices in unique packages even if they never actually make one since it costs about a million dollars to do so. One of my favorite patents is US6,183,343 which belongs to Nanometer. We use and like their automated fiber optic polishers. They invented the first device to automate figure 8 polishing. But in a great example of how patents can be worked around, the industry just flipped the device on its head and rotated a different part of the polishing process. Having a patent protects your idea but doesn’t mean someone can't accomplish the same thing in a different way. It's a double edged sword, you have to patent your idea so someone else doesn’t…but don't count on a gold mine unless you have a lot of lawyers like the group that went after RIM (couldn’t find their website, but you can read about them on…wikipedia.

I saw an article the other day about an inventor that got his 100th patent. 100. This really a guy who ate, slept, and wrote patent applications for 30 plus years. In general, most people I talk to or read about in the field of patents think that the system is broken. A US patent does nothing to help you in China and for technology as soon as you have something made over in China you can forget about keeping the design a secret. Or, getting a fair shake in court. Samsung recently lost a patent case about mobile phones. When I saw the news headline I figured this would be a big deal. But if you read the article you see two really interesting things: one, the court was in China and two, Samsung wasn't notified of the results of the case. I'd bet politics had the upper hand in this case and having been in optics for nearly 10 years and seeing what comes out of China on counterfeit Cisco products or Avago products, this court case was a shock. The counterfeiting is so bad that the FBI actually has a group called Operation Cisco Raider and you can read about the group and other amazing stories of counterfeit products in the legitimate sales channel at http://www.agmaglobal.org/, a group whose sole purpose is to help the electronics channel deal with counterfeit product. Fake product is very tangible.

If you can get past the counterfeiting threat, patents still make sense. And, they aren’t that hard to apply for. The USPTO has a very simple site. Too simple, it reminds me of a DOS prompt. Maybe it's just the colors or maybe it's the way I can add criteria to my search that makes me expect to see "10, 20...etc" running down the left edge of the page, but I think there are a few ways to improve the patent system:

1) Change the pricing model so if someone wants to rush a patent thru, they can pay more. Today's wait for patents is about one year. Want it done fast, pay for it.

2) Membership. To file a patent, you have to join the USPTO club. I realize that you submit your information when you file, but I should be able to search patents by user and even their preferences, not just a cryptic and often secretive Inventor Name category.

3) Which gets me to the Facebook of Patents and there are two parts to this: 1st, you can search through communities of patent types. In today's hypertexting world, there is more to knowledge management than just drop downs. And 2nd, user votes. Lets say it's not the deciding factor, but it should be a factor nonetheless. Oh, and the membership costs money.

4) Change the time limit. 7 years is plenty. Just over two lifecycles or 1 1/2 x a typical depreciation schedule of an asset. Wouldn’t it make sense for the USPTO to reference the IRS? Act of God...two government departments synchronizing. I do realize one is a tangible asset and one is intangible which is where this rant got started, but there should be some tie-in.

5) Setup a follow on process for scope. The patent use needs to be applied to a specific use initially or at least within a term. This might help stop patent trolls.

6) Change the pricing model for those individuals or companies that have more than 50 patents. It would be like my IEEE membership. If you're a big company, you pay more. It evens out the fact that they can decpreciate their R and D assets over more things.

7) Finally, buying a patent should involve paying the USPTO. Nobody likes giving money to the government and maybe the patent trolls would hesitate if they had to pay Uncle Sam a bit.

Changes to the patent process might not be at the top of Obama’s priorities in January but change often encourages innovation and spurs activity which could lead to more jobs. Maybe the country’s first CTO will find a way to make intangibles more tangible.

Third Birthday

Counting Photons, A Fiber Optic Blog, or Flog, on the state of Fiber Optics in Harsh Environments. November 2008. Cleveland, OH.

COTSWORKS is coming up on its third birthday, and even in the chaos of the financial meltdown and commercial aviation production delays, we're looking forward to it. 3 is a good age, we're beyond the Terrible Twos and operating like a small business and not a start up.

Ironically, the financial meltdown has hit us less than you might think. We really were slow six months ago, now, things are actually picking up. We're glad to see the strike at Boeing over. Being in Cleveland, it was hard to watch for many reasons. First, a lot of our business is tied to Boeing. Second, all of us at COTSWORKS survived the strikes and collapse of the automotive business back in the 80s. Strikes benefit no one and hurt everyone. We're glad to see that management and labor are working together and hope everyone realizes just how much work stoppages affect the supply chain.

Like it or not that supply chain is nationwide and global. When I first started working with Boeing I was surprised to see just how much manufacturing used to be done on S. Marginal in Seattle. You could drive from one end to the other and build an airplane; but then, you didn’t have to worry about selling large contracts to customers outside of the US. Today, the more you outsource to a country, the more that country will likely buy your airplane. The globalization of the economy has thinned the line between borders and between vendor and customer.

While there has been a lot of focus on delays in the 787 and A380 program, the scale of success for both programs depended on sales and development outside of Seattle and France. And if there are doubters about the need for global integration, you only need to look at the Joint Strike Fighter. Even the military has realized that it needs foreign partnerships to succeed.

Speaking of which, I'll be heading over to Amsterdam in March to speak on fiber optics at the Avionics 2009 conference. I look forward to seeing our partners and friends in Europe then.

Ken Applebaum
Director