Posts Tagged ‘patent reform’

Patented Technology is Key to RoadLoK’s Success

Tuesday, July 14th, 2015

There is no lack of ingenuity and innovation in the U. S. today. Each year, thousands of new products are invented, and but most are never produced. Knowing how to use technology to create a product doesn’t mean you know how to manufacture it and get it to market. Obtaining a patent is a key factor in achieving success, but you also need to recognize the limitation of your knowledge and expertise and utilize experts in fields you need, such as product design/engineering, patent/licensing, material/process selection for prototyping and production manufacturing, and marketing.

I recently had the opportunity to interview Adam Xavier, founder and CEO of New Hampton Technologies dba RoadLoK Security, who is an example of an inventor and entrepreneur who successfully got his product patented and into the marketplace.

His company distributes products worldwide under the brand name RoadLoK. The company specializes in the design and production of model-specific vehicle locking systems for motorcycles, scooters and off-road power sports vehicles. The RoadLoK is the only locking system that safely and effectively prevents rollaway theft. The system is designed to be permanently mounted on a motorcycle, thereby eliminating the need for storing the lock while riding. The system’s permanent mounting eliminates all momentum, making it virtually impossible to damage calipers and fenders. This is accomplished while also protecting the rider, should the rider forget to unlock the system before attempting to ride off.

I asked how he got the idea for his product, and Adam said, “My twin brother Eric and I were sitting in the outside seating area of a bar the summer after we graduated from college and saw a man forget to take off his lock and tip over his motorcycle. We started talking about a better idea for a lock and drew a sketch on a napkin. The next day, we searched to see if there was a lock similar to our idea, but didn’t find one. We took our sketch to a CAD designer to turn our idea into a design that could be manufactured. A friend from college, Matt Tomosivitch, who had become a machinist, made our first prototype. Matt is now the chief engineer of our company.

Continuing, Adam said, “We made a video of our lock that showed how it worked. We wrote a comprehensive 60-page business plan. We filed for a provisional patent in July 2005. Then, we sent our video to local investor network group in New York and were kicked down to the group in our area, Orange County. The director contacted us, and we gave our pitch in December 2005. We got our first investment check from the Orange County Capital Development Group on February 16, 2006. This investment was enough to get us to our first trade show in March, the International Motorcycle Show in Atlanta, GA.

Adam said that they set up their first office in Middleton, NY and later moved to Newburgh, NY. They spent two years of R&D to finalize the design and raised another $3 million over three years to get into full production. They used 3D printing to make new prototypes as they improved the design. They received a lot of mentoring and hands-on help from their angel investors.

Their first utility patent was granted on December 23, 2008 after their third attempt at an “office action” at the patent office. They got their second patent in 2010.

When they started the company, Adam said that they wanted to keep everything made in the U. S. They used www.thomasnet.com to find all of their vendors. They have seven major vendors for all of the different parts of their product, and they are located in Illinois, North Carolina, New York, and Texas. Their mission is to produce a high quality product, so all of their vendors are ISO 9001-2008 certified to meet the exacting requirements of their customers.

They later moved to California because they needed to have face-to-face communication with their two biggest customers, one located in Murrieta and one in Corona, CA. California also has the biggest population of motorcycle riders.

The executive offices are now located in Santa Monica, CA, but their product is manufactured in Salisbury, North Carolina and assembled to order at their plant in Torrance, CA. Since the RoadLoK is produced to order, production is not automated and does not utilize any robots. They are looking at doing more vertical integration of parts manufacturing. Their screw-machining vendor in Chicago makes two parts, and the patented design of their locking pin has 5 components made by three different vendors.

They started to implement lean principles in 2009 and changed one component from a square rod to an extrusion, which reduced material waste by 62%. They have been working towards reducing other material waste and time since then.

Their original plan was to focus on after-market sales of the product for the first two years and then license the product to motorcycle manufacturers on a non-exclusive basis similar to how the airbag is licensed to car manufacturers. Now in its 9th year of operations, RoadLoK’s largest customers are KTM Sportmotorcycle and Ducati with others to be announced within the next year.

When asked how his company has been impacted by competition from offshore in Asia, Adam said, “We don’t have any direct competitors offshore, just cheaper substitute locking mechanisms. We are selling in Australia, Japan, and China and recently selected a company to partner with to produce parts in China to sell to the Chinese market. We have started the process to file a patent in China. We need to have manufacturing plant in China to sell to the Chinese market because of the high import duties. Brazil is another county we are looking at to set up a manufacturing plant because of the high import duties. There would be a win/win benefit of jobs to the community and provide a much-needed product for the people.”

I naturally asked how the recession affected his company when they were only a little over two years old when it started in late 2008. Adam said that they were spending about 85% of their time setting up a distributor network and program to sell to dealers utilizing direct sales persons. But, motorcycles are purchased with discretionary income, which dried up during the recession as people lost their jobs. So, their direct sales to motorcycle riders through distributors/dealers dropped drastically. To survive and grow, Adam said, “We had to reduce our direct sales staff and reduce our travel costs. We changed our sales model to online retail sales and direct sales to motorcycle manufacturers. This model has helped us grow and succeed. We have also started R&D on the next generation of vehicle immobilizers to other two or more wheeled vehicles that do not have a transmission.”

Adam had read my article on “Which Patent Reform Bill Doesn’t Destroy the American Patent System?” and said, “Our having a patent pending was key to getting investors and having a patented product has been the key ingredient to our success as a company. Investors want the protection of a patent, but they wouldn’t take the risk of being made personally liable. There is no way that we could have gotten investors if our investors had been personally liable for defending our patent in a patent infringement lawsuit.” Note: Adam was referring to the “Loser Pay’s provision of H. R. 9 and S.1137.

If we want to have more successful companies manufacturing products in America, then we need to protect our American Patent System and stop H.R. 9 and S. 1137 from being passed. Instead, we need to pass the Strong Patents Act of 2015, S. 632, which will “Enact balanced reforms to reduce abuse while sustaining American leadership in innovation.”

 

Anti-Inventor Legislation Being Proposed in Congress

Tuesday, February 3rd, 2015

Sometimes it seems we have to play “Whack-a-mole” against well-meaning legislation that would have harmful, unintended consequences. Last year, the Innovation Act, H.R. 3309 passed the House of Representatives by a 325 – 91 vote on December 5, 2013. It seemed like a comparable bill would easily pass the Senate until a concerted effort to defeat this bill was undertaken by Randy Landreneu, Founder of the Independent Inventors of America, and another inventor, Paul Morinville, by visiting key people in the offices of about 60 Senators.

Their efforts were aided by such organizations as CONNECT and Biocom in San Diego, the Biotechnology Industry Group, and the Independent Inventors of America. Because of the opposition by these groups and other groups not cited, the bill ended up being dropped in the Senate.

Why did these organizations oppose this effort on patent reform? Gary Klein, V. P. Public Policy, of San Diego’s CONNECT organization, stated: “A startup company’s main asset is its intellectual property. Most investors’ first question to startups is about how their technology is protected. The Innovation Act that passed the House has several provisions – fee shifting, covered business methods, joinder rules, discovery and customer stay – that will have some very serious adverse consequences for small/startup companies, universities and research institutions, as well as companies who use licensing as a business model.”

Joe Panetta, President and CEO of Biocom, stated “Not only does H.R.3309 fail to adequately address the abusive litigation practices it aims to curb, but it would place burdensome and unnecessary requirements and penalties on all patent holders. The bill is likely to inadvertently harm the world’s greatest innovation system by limiting legitimate patent holders’ ability to assert their rights.”

The Biotechnology Industry Group (BIO) was concerned that it would undermine biotech research and innovation. Daniel Seaton noted on BIO’s Patently Biotech blog, “the Act would ultimately make it more difficult for patent holders with legitimate claims to protect their intellectual property…Provisions in the legislation would erect unreasonable barriers to access justice for innovators, especially small start-ups that must be able to defend their businesses against patent infringement in a timely and cost-effective manner, and without needless and numerous procedural hurdles or other obstacles.”

The Independent Inventors of America against Current Patent Legislation, representing independent inventors and small patent-based businesses across the country, disputed the claim that patent infringement litigation had escalated. They initiated a petition stating “The Government Accounting Office Report required by the America Invents Act finds that there is no ‘patent troll’ problem. Data supporting the claim of billions of dollars of reported cost cannot be verified and actually represent primarily voluntary and court directed license agreements for valid patents. In addition, analysis of patent litigation shows that the number of patent suits relative to the number of patents issued today remains consistent over the 200 plus year history of the patent system with the exception of a short period prior to the Civil War when the rate was higher than it is today. The reports supporting this latest round of legislation are simply not valid.”

They argued that “what is being characterized as a “patent troll,” and the target of the proposed legislation, is really an investor. As individual inventors and small patent-based businesses, we need investors to practice and protect our inventions. A patent is sometimes the sole asset we can leverage to attract that investment. Damaging investors therefore damages inventors.”

The petition stated, “This legislation will levy grave harm upon independent inventors and small patent-based businesses, as well as the investors we need to help commercialize new technologies and to protect our inventions.” They “stand firmly against the proposed legislation and any future legislation that would weaken the American Patent System.” The governing body of the San Diego Inventors Forum, of which I am a member, signed the petition along with many of our members.

The main reasons why inventor organizations opposed the Act were:

Loser Pays – would significantly increase the risk and cost of defending a patent and “could be fatal to a large percentage of inventions.”

“Joinder” clause – allows investors to be personally liable for legal fees if inventor loses lawsuit, so this would severely limit investment in new technologies.

Patent Term Adjustment – eliminates a patent adjustment for a delay in patent issuance caused by the U. S. Patent Office (Note: Patents are granted for 17 years, but if it takes five years to get a patent, the patent term would be only 12 years instead of 17.)

New Bill in the Works

Now, Washington, D. C. insiders are indicating that legislation very similar if not identical to the Innovation Act will be introduced in the House of Representatives as early as February.

Why is a new version of the Innovation Act being proposed? The stated purpose is to curb frivolous lawsuits for patent infringement by so-called “patent trolls,” a derogatory term defined by Wikipedia as “a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking. Related, less pejorative terms include patent holding company (PHC) and non-practicing entity (NPE).”

Proponents of the Innovation Act said that” in the two years since the AIA was enacted, patent litigation has exploded. More and more firms are acquiring broad patents not to use the technology but rather to extract licensing fees from companies that infringe the patents accidentally…so a number of industry groups that weren’t traditionally involved in patent debates have begun agitating for patent reform.”

However, the Patent Freedom organization states, “NPEs are not all cut from the same cloth. Some inventors choose not to pursue the development, manufacturing, and sales of their inventions. They may lack the resources to do so, or the interest, passion, and commitment that such an effort requires. Instead, they may seek to license their inventions to others who can use them to deliver better products and services, often with the assistance of those with experience in this area. Or they may choose to sell the patents outright…. some entities buy patents with the express purpose of licensing them aggressively. For instance, about 25% of “parent” NPEs tracked by Patent Freedom are enforcing only patents that they had acquired. Another 60% are asserting patents originally assigned to them, and the remaining 15% are asserting a blend of originally assigned and acquired patents”

If new legislation is crafted to be similar to the Innovation Act, it would create additional requirements as part of the legal process associated with patent infringement under United States law. Some of the provisions that were in the Innovation Act are paraphrased below:

  • Requires specificity in patent lawsuits – requires specified details concerning each claim of each patent that was allegedly infringed.
  • Makes patent ownership more transparent with a “Joinder” clause requiring patent plaintiffs to name anyone who has a financial interest in the patent being litigated. This would include investors.
  • Makes the loser pay – “if a losing plaintiff cannot pay, the bill would allow a judge to order others who had a financial stake in the plaintiff’s lawsuit to join the lawsuit and pay the costs of an unsuccessful patent lawsuit.” This could force investors to participate in paying the legal fees, which would discourage investment.
  • Delays discovery to keep costs down – gives time to allow the courts to address legal questions about the meaning of patent claims with the goal of reducing legal costs and allow more frivolous lawsuits to be resolved before defendants have incurred large legal bills.
  • Protects end users – allows technology vendors to step into the shoes of their customers and fight lawsuits against trolls on their customers’ behalf in cases where restaurants, supermarkets, airlines, casinos, real estate agents and other brick-and-mortar businesses are being sued for using technology such as Wi-Fi instead of the manufacturers of the equipment.

Randy Landreneu, Independent Inventors of America, stated: “There were a number of provisions fatal to independent inventors, like Loser Pays (if you sued a corporation for patent infringement and did not prevail, you would be liable for their legal costs, which could be over $1,000,000). The Innovation Act also had the provision that an investor with an interest in your patent would be personally liable for these legal costs. This would have eliminated the ability to defend a patent for the vast majority of inventors, as well as greatly reducing any investment in patent related startups.”

Adrian Pelkus, SDIF President, states, “A new version of the Innovation Act horrifies me in the way that it would allow corporations to beat up on small inventors. Financial ruin for inventors would be extremely easy due to the nature of startups, meaning most inventors could lose their fledgling businesses disputing challenges to issued Intellectual Property. If we increase the risk that their IP will be challenged (perhaps even frivolously just to stop them from progressing to market), innovation will grind to a standstill.

At a time when we need American ingenuity and investors to rebuild our economy, taking steps to diminish our rights as inventors is un-American, economically dumb and intellectually suicidal. Stifling innovation in a technologically based society is a sure path to economic ruin which is why the USPTO system was originally designed to reward not punish the inventor. We are a nation of creators and builders living at a time when science and technology is exponentially enriching our quality of life. Disturbing the evolution of ideas disrupts our development as a society, and changes to our patent laws are doing just that. American inventors create new products and jobs. The more we enable inventors, the more our country prospers and the better our lives become. We can expect only the opposite if we if we stifle inventors by allowing laws to be passed by corporations pressuring our representatives to protect only their interests.”

I urge everyone to contact your Congressional Representative before the new bill hits the floor. Tell them that you are against further weakening of patent rights. Tell them that current efforts at “patent reform” will greatly hurt inventors and innovation in America. We must not stifle innovation if we want to create more American jobs and maintain our technological advantage in the global marketplace.