Tuesday, February 9, 2021

Stop Gaming GameStop, Robinhood. Hold em, or Fold em?

What’s up with the Stock Market(s)? Feb 8, 2021 the various stock market indexes all hit all time highs. Wow. First off, Trump was very business friendly – some would argue too business friendly (at the expense of the environment and labor. But the market has chugged happily upward based on the likelihood of a Biden win and the certainty of it after the election. Markets don’t like uncertainty, and Trump has been a wildcard on many things like trade and certain industries. But historically the markets have gone up after a presidential election no matter which party wins. Of course, there are sector winners (renewables) and losers (oil, coal and gas).

Major US Stock Indexes for Year ending Feb 8 2021. S&P, DOW, Russel 2000, NASAQ QQQ


The current stock market is betting on another massive stimulus package and trillions of dollars sloshing around in the economy. The interesting thing about the mid-2020, the December and the upcoming stimulus is where all these boatloads of money go. Many people have been working from home, making roughly the same amount of money, and no good place to spend it. Savings rates were about 35% from the first round, vs some 10% typical. There’s a limit to how much time and money you can spend on your house. There’s a limit to how many vehicles you need when you are working from home. Fixed income investing yields nearly zero percent (real) return.

How about, let’s go gamble – I mean invest – in the stock market. And we did. They call us “Retail” investors (or individual investors) because we go out and buy stocks on our own without the adult supervision of brokers and money managers. A whole new group of investors were born using platforms like Robinhood and forming investment forums in places like Reddit.

On the other hand, there’s the institutional investors that have large investment portfolios for pensions and such. Money managers have to be in a bull market or else they miss the boat, look bad by reasonable comparison, lose money in their funds, and get fired. Then there’s the hedge funds that use leverage and options to make profits when the market goes up, when the market goes down, and especially when there’s lots of volatility.

The basic stock options are puts and calls. You can buy a call option for a specific strike price in a specific month (usually the 3rd Friday of the month is when options expire). If I think that Apple (AAPL) is going to go up, I can buy a contract for 100 shares of apple in the future, say March. Apple is currently at $136 (Feb 8, 2021). If I purchased 100 shares I would need $13,600, but I could buy a contract to buy 100 shares of AAPL at $150 strike price in March for a paltry $.80 per share. That’s $80 for 1 contract, plus some brokerage fees. If the stock price goes up, the value of the option goes up dramtically. But, if it doesn’t go all the way to $150 or higher by the expiration date, the option becomes worthless, I lose my $80 per contract, and the person who sold it to me still has their 100 shares of apple, plus an extra $80 for the inconvenience. If Apple goes above $150 by early march, the option is “in the money”, i.e., it will execute at that level on expiration Friday. If AAPL goes to $152.80 at expiration, then I will automatically own 100 shares of AAPL at the strike price of $150. Although I do have to fork over a lot of money ($150 x 100 = $15,000), I am getting $15,280 worth of stock that I can immediately sell. So I made $2.80 per share, but it originally cost me $.80 a share for the call contract. Usually, I don’t hold my call options for Apple until expiration, I just sell my options for a profit or a loss a before expiration.

If the stock goes up, say 5%, the strike price becomes much more attainable and the options value may go up 20% or 30%. Of course, the same is true of a drop to amplify the losses! But, the most I can lose in the case is $.80 on my long bet.

Brokerages are so nice, they will lend you money to buy “on margin”. If you had $100,000 that you invested today in stocks, for example, you could borrow maybe 50% on margin, meaning that you could buy another $50,000 in stock to go with your cash purchases. When the market (or your specific stocks) are going up, you are doing the happy dance!:-) But, when things go south, you could end up getting crushed. The higher volatile stocks that you were borrowing against may become more risky and move to 0% marginable. The leverage that helped you expand your purchasing power by 50% will increase your losses on the way down. The brokerage might even issue a “Margin Call”, and start selling off your (good) stocks to cover your margin. Ouch. Ouch! And Double OUCH!!!

You can buy stocks, and you can buy options, with a long position (expecting the stock price to go up) or a short position (expecting the stock price to go down). Hedge funds sometimes get into stocks (via options) when they anticipate something big happening. If they expected the company to be struggling and maybe even go out of business they could bet short and make a lot of money doing so. In fact, just the attention by hedge fund (short interest) can make a struggling company have even more problems and even put them into bankruptcy. For a $20 stock, let’s say for example GameStop (GME) they might bet it would drop and have options to sell stock on expiration at, let’s say $25. These contracts are 100 shares each. What if the hedge fund has agreed to a contract to deliver, say, 1 million shares of GME at $25 at expiration in Feb, BUT they don’t actually own any shares in the gaming company. Risky shorts find themselves in this position. This is called “Naked Shorts”. The hedger has to buy stock on the open market to cover their shorts. This is called a short squeeze. At one point the shorted shares for GME were more than 150% of all available shares. And as GME kept rising and rising, up to almost $500 per share, the pain of the squeeze and the struggle to cover the naked shorts got worse and worse. The Robinhood gamers just kept piling in. This is for a stock that was under $3 per share at the bottom of the COVID recession in March 2020. People who rode the stock down for $400 to $60 are probably pretty sad right now. There’s no good reason that it won’t return to $20 or even lower.

It’s funning that the Crowds have been rooting for the underdogs, the Robinhooders. Some hedge funds have been crushed. Regulators think there’s something they should do. Assuming that there’s nothing criminal going on, they are probably just billowing smoke. In the meanwhile the Robinhooders and Reddit gangs have taken on other targets like American Airlines (AAL), AMC, silver and others.

Feel free to follow the Reddit gangs. This may be the best thing to happen to younger investors where they make investments, hopefully in addition to the retirement plans (IRAs, 401K). Make sure to use your “Mad Money”, not your life savings. Try to take your winnings out of any profitable play and maybe let some of your winnings ride. This gaming the market and betting. In the wise words of Kenny Rogers: “You got to know when to hold em, know when to fold em; know when to walk away; and know when to run.”

GameStop (GME) Stock Price for Month ending Feb 8 2021


#Robinhood #Investing #Reddit #Options #LosingYourShorts #IntellZine #SBPlan #IPPlan

 

Thursday, December 31, 2020

Invest in the Future of Self-Driving Cars and EVs

When you look at the future of cars (and trucks) there’s a couple things that you can learn from the Jetsons. Yes, the cartoon characters of the future. Self-driving. Not limited by Gravity. 

There are several things that would be reasonable to expect in the future of autos:

1.     1.      Huge computing capabilities.
2.       Mountains and mountains of data.
3.       Lots of sensors.
4.       Vehicles that can talk to each other, directly and indirectly. Kind of the Internet of things on (mobile) steroids.  (If the traffic ahead is stopped, it would be good to know before you get there.)
5.       Electrification on the way to sustainable/renewable transportation.
6.       Self-driving
7.       New vehicle uses and business models.

Although there is much overlap, we’ll focus on only two points at the moment, but from a stock-and-market perspective: the self-driving car and batteries (range). Look at the article on IntellZine from 2017: Intel and Mobile Computing: An Eye on BIG Computing on the Move.

Autos and Self-Driving. Everybody thinks of Tesla related to self-driving, but there are others. See excellent Wikipedia Self-Driving article.  Lots of investors are trying to jump into the early stages and even the late stages of this market. But let’s start with Tesla.

Tesla’s market cap at the end of 2020 exceeded $650B, making it larger (based on stock value) than the top 10 automakers combined. In an industry that is expecting to sell only 14.5 million units in 2020, it is a little hard to justify this crazy high market pricing. The Price-Earnings ratio is 1,300; but based on expected earnings, the PE is more rational for a growth stock at 160 times. However, if the rapid growth (130% yoy revenue growth) continues, the PEG ratio is closer to 1.3. For a smaller company expecting 100% or more revenue growth for several years is not impossible in some cases, but for a larger company going into a maturing industry, not so likely. So, buy tesla at these elevated levels at your own risk.

The Tesla car has been referred to as an iPad on wheels. Much of the smarts behind the Tesla user interface is from Apple. Apple is by far the largest company in the world with $2.3T market cap. So, wouldn’t it be interesting if Apple decided to get into the Electric car business, as rumored (but not officially announced) in December 2020. Apple, in the meanwhile is developing their own chip sets so they can separate themselves from the big chipmakers, chips that are more efficient and faster. At the same time, Apple is partnering with manufactures of sensor technologies. Apple appears to be designing its own break-through battery technology. The current (announced) plan appears to be an Apple car release in 2024. (See the Reuter’s article about this.)

So let’s see, the key 3 ingredients to the car of the future are: the software, the user interface/ecosystem, and the battery. Throw in the ability to market and sell. Anybody can manufacture the car, well, anyone with the factor and skilled factory workers. Apple looks like a safer buy even at a PE of 44 and 33 forward PE (back out the $100B cash, though). The PEG ratio is way high 3.3 because of -7% revenue growth last quarter, but it has historically been about 2.0 which is very reasonable for a mature but growth company.

The other way to play these trends is to go for the break-through technology companies in the battery and sensor space. A couple that have gone absolutely nuts after a reverse merger this year are LAZR and (QS). QuantumScape (QS) has patented technologies and manufactures solid-state lithium-metal batteries, especially for the auto industry (up about 1,000% over 6 months). Luminar Technologies (LAZR) designs, builds and sells long-range lidar products for autonomous driving (up about 300% since Thanksgiving). Both have stabilized a little, so consider buying them on weakness.

Related to battery technology is fuel cell. Fuel cell technology functions like a battery or a battery backup, all you need is hydrogen. This year, fuel cell technology has gone absolutely bonkers. FuelCell (FCEL) is up from $2 to $12 in a month. Bloom (BE) is up from $5 in March to $30. Plug Power (PLUG) is up from $5 in June to $35 in December. Over the years you could have lost a lot of money owning these companies; maybe the time for fuel cell is finally arriving.

In short, if you love Tesla, go buy the car. Lots of companies can, and will make the cars of the future, including electric and self-driving. The Tesla company does have room to grow in lots of directions (Trucks, Solar, HVAC), but there is already a MASIVE amount of growth already priced in.

 

Monday, November 9, 2020

Putting Pen to Paper with Patent Innovation

When you think about images of the first writing instruments, you envision charcoal, paint brushes and quill pens. The image of Shakespeare dipping a quill pen into an ink well come to mind. The ink smeared, it blotched and it took time to dry. You know the sign of a writer by the ink all over their hands (and their poverty, of course). The poverty part is still true, about the starving writer, right?

There are many key inventions related to the pen, but none so significant as the ball-point pen. The most significant developments involving the ballpoint pen can be traced to Hungarian inventor László Jozsef Bíró. Stephen Brackman provides a great history of ball-point invention and the patent history at IPWatchdog.

The reason that anyone and everyone ended up with dozens of pens is because of 
 Bic. Marcel Bich (company name was shortened to Bic) was the key player in this mass production product bringing the pen down to $1 or so per pen from hundreds of dollars per pen (converted to current price equivalents). Bic licensed the patent technology from Bíró, and also had a couple design patents.

A great article about the evolution of the ball-point pen is presented in BBC by Stephen Dowling (Oct 29, 2020). As you read through, read through this exceptional history, think about the monks copying books by hand, and how far and how fast we have moved forward with the printing press, the pen, the mail.  All still in use today. (Well, not the original printing presses...)

Another fun article is about other patents in the ink printing space. Here are 5 Fascinating Pen Patents at the Fun Facts section of Jet Pens. You want to read and look at the pix!:-) Here are the 5 patents:

  • Pilot Frixion Erasable Gel Ink Pen. That’s right, you write in this special ink and the eraser erases it. (Kinda, thermal makes the ink invisible.)
  • Fisher Space Pen. The pen that has pressurization, so it works up-side-down and in space.
  • Lamy Dialog 3 Fountain Pen. This fountain pen retracts and then a solid ball covers the nib so it doesn’t dry or leak.
  • Field Notes Color Cover Memo Book, Expedition Edition. This specialized book has Yupo synthetic paper that is waterproof, tear-proof and 100% recyclable. So this is not really a pen, but for a pen to work, you do need paper. You will want to take this book and your space pen on your Himalayan adventure.
  • Sakura Gelly Roll Gel Ink Pens. The ink in these pens has metallic and glitter. Since the ball-point pen works on the idea of a very smooth, even flow of ink, this is an interesting technology to achieve. 

Even with the invent of the computer, there are times when you want to, or need to, write. Studies show that you retain information better when you right them down, even if you don't revisit the notes. You retain better with handwritten notes than typed notes. 

What do you think are other great pen, or writing related, inventions?
What do you think is the next great, or not so great, invention related to the mighty pen?

Wednesday, October 7, 2020

Strategic Planning for Small Businesses and Non-Profits

Every business needs to do planning and reporting. The trick for each organization is to do the right amount of planning. You can’t spend all your time planning, and you can’t completely avoid planning. Ideally you should work the planning process around the reporting and accounting that you have to do anyway: mainly tax reporting that culminates at the end of the tax year. The approach visualized in Figure 1 organizes your year so you can build a corporate calendar and activity checklist that matches your needs.



Even though an annual planning process, with a calendar and checklist, is important, occasionally things will happen that require instant and immediate planning. You might have developed contingency plans for certain possible events, like a hurricane disaster recovery plan, but occasionally the world will dramatically change around you such that you are thrown into a situation where everything – and even the existence of the organization – is thrown up into uncertainty. The COVID pandemic is such an exogenous event. All aspects of the long-term direction of the organization must be revisited, and the near-term approach for survival needs to be mapped. Survival Planning will be addressed later.

All organizations have a similar process that they should execute, a process that spreads the planning out over the year. It is often easiest to break the major planning activities into four quarters. That doesn’t mean that you work all quarter on a specific planning activity, just make sure you do it during that quarter. For example, you might have a summer weekend retreat for brainstorming new products and services.

Unfortunately, most small organizations, especially small non-profit organizations, do not take the time, or schedule the time, to do the most critical planning. In the worst case, they may miss critical deadlines (IRS filings, for example) and even jeopardize the continuity of the organization. Think of this as non-compliance, i.e., not doing the things that are required of any business or non-profit organization.

Large companies use the corporate strategic planning process as a tool to continually focus on their goals and objectives, to understand where they are going and to engage employees in building the business.  Normally conducted on an annual basis, the process takes several months from initial data collection to the completion of the corporate business plan, annual report and budget.  With few exceptions, if it isn’t in the plan and the budget, it won’t get done. 

Figure 1 depicts a general planning process and how the planning activities for the next year begin soon after the operations of the current implementation year has begun in the first quarter. Smaller organizations can simplify this process somewhat, but still should do similar activities.

Here's how the planning process would work on a quarter by quarter basis. Assume that the business operates on a calendar year with December being the last month of the year, and January being the first month of the next year.

·        Qtr 1, the implementation quarter. The 1st quarter of the implementation year is when all the planning and budgeting from last year needs to be implemented. This is a very busy time, hiring people, buying stuff, launching initiatives. In short, there is no time for planning during the implementation quarter, it is time to start executing the business plan approved and funded during the prior planning year that culminated in an approved business plan and budget.

·        Qtr 2, Spring Strategic Outlook, is a good time for brainstorming: to do longer-term planning and new product development. Are there new products or services that need development efforts in order to be considered this planning year for launch next year? This is a good time to do a Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis if the environment has changed significantly since the last SWOT analysis. Consider a rapid planning and prototyping process like LEAN Canvas.

·        Qtr 3, Business Performance Assessment. After 6 to 9 months of the year, the organization should know how things are going. Is everything on budget? Are changes working out? You should now be able to accurately estimate the full year. This is the time to develop a proposed budget for next year, especially for those things that are going as planned this year and should continue uninterrupted next year. New products or major purchases for next year’s budget consideration should be narrowed down and refined.

·        Qtr 4, Business Plan Development and finalized budget. Quarter 4 is the major planning and reporting quarter. That is when the best information of the year will be available. The full year numbers have to be organized, reports to IRS completed, employment filings completed, etc. Therefore, the end of the year is when the best information is available. As part of that process is full financial statements and a proposed budget for next year. The board of the organization needs to approve the budget for next year and the plan that goes with it. (Note that the required reporting is not due on the last day of the quarter, December 31 in this case, but all the past years numbers should be very close if not exact, so federal and state reporting in the first few days of the new year will be easily accomplished before deadlines. Consequently, some of the final stages of the planning process described for the 4th quarter might not be completed until the first few weeks of the new year.)

·       The next Implementation year begins with the new plan and budget, so a scramble ensues to implement the plan and have a successful new year.  

Links and Resources

Several organizations and books provide resources and checklists for people who are planning to launch a business. They generally don’t distinguish between a for-profit and a non-profit because every organization needs to do the same types of things: draft a business plan, accumulate startup funding, incorporate, etc. Each year you should revisit this checklist to see what needs to be updated. The planning process described in Figure 1 helps with updating the business plan, the goals/objectives, the past financials, and the proposed budget.

Here are several links of startup checklists/resources and also compliance checklists for Non-Profits.

·        Small Business Administration Resources: www.SBA.gov

·        Small Business Administration 10-Steps to Start a Business.

·        SCORE’s Checklist for Non-Profit Organization Startup.

·        Indiana (IN.GOV) Best Practices Checklist for Non-Profits.

·        WildApricot’s Compliance Checklist for Non-Profits.

·        Cullenan Law’s Year-End Checklist. (5 categories)

·        RocketLawyer’s How to keep your Non-Profit in Compliance: a Checklist.

·        Wayfind’s startup table/checklist (long but comprehensive).

·        BoardEffect’s Checklist for starting a Non-Profit.

Metrics

All businesses need to have clear metrics. How do you know that you are being successful? Revenues and net profits are always good metrics, but you want to have more than that. For example, you have to get the customers before you get the increased sales. There should be a pipeline of customers. You can identify early if your pipeline is showing leaks by various types of customer satisfaction checks. For non-profits, there may not be “customers” but there will be key constituents; you don’t technically have profits and net income; however, if you still need more money coming in than expenses to maintain operations.

You may want to issue a certain number of new products/services ever year, so you could look at the new products and how well they are received.

Non-profits (NPs) have special challenges. Many NPs sell products and services, even if they are frequently discounted or subsidized compared to the full costs. They also may have donor funding, grants, etc. And they usually have volunteers, sometimes a massive number of volunteers compared to a few employees. Keeping a good accounting of the volunteers, volunteer hours, and approximate savings from volunteers is important for reporting and justification of how far you can stretch funding from donors and grants.

As a Non-Profit, think about those factors that influence people to select and donate to a cause. Organizations that have high administrative expenses will have much less money to contribute to the actual cause. Donors (and volunteers) who are reviewing the causes that they will support look to see how charities are ranked and rated. People visit these key sites, among others, to make charitable giving decisions:

·        CharityNavigator.org. This site ranks charities within particular categories. This is the most important site for someone considering which causes to select for charitable giving.

·        GuideStar.org. This site does a deeper dive into the non-profit, reporting, officers and programs.

·        Give.org, by the BBB Wise Giving Alliance, provides a Better Business Bureau type of list for complaints about Non-Profit organizations. Use this source carefully. A very large national or international organization might have thousands of complaints but only a tiny fraction of all customers served.

·        IRS.gov has a searchable database of charities that qualify for charitable tax deductions. Since most people like the added benefit of a tax deduction from their charitable giving, Non-Profits must remain vigilant in maintaining their tax-exempt status as well as their qualifications as a charitable organization.

·        An excellent article in  Forbes by Nancy Andersen discusses these important online resources for someone selecting a charity, and therefore, critical to the non-profit charity as well.

·        Social Media, especially FaceBook and LinkedIn pages, for the charity will have followers, likes and even ratings that will offer clues as to the quality of the organization and the services provided. Many charities have blogs and resource pages as well.  

We wish you the very best with your endeavors and hope that this brief article on planning will jump start a quick and efficient planning process for you and your organization.

This article is adapted from the introduction from a 2017 book by Hall and Hinkelman on Strategic Planning and Patent Commercialization (the first in the Perpetual Innovation™ series). All rights reserved. Visit our bookstore: http://www.lulu.com/spotlight/SBPlan

Based on the reception of this article, Hall & Hinkelman may develop a book for small businesses and non-profits in the Perpetual Innovation™ series. 

Hall, E. B. & Hinkelman, R. M. (2018). Perpetual Innovation™: A guide to strategic planning, patent commercialization and enduring competitive advantage, Version 4.0. Morrisville, NC: LuLu Press. ISBN: 978-1-387-31010-4 Retrieved from: http://www.lulu.com/spotlight/SBPlan

Hall, E. B. & Hinkelman, R. M. (2017). Perpetual Innovation™: Patent primer 4.0: Patents, the great equalizer of our time! An overview of intellectual property for inventors and entrepreneurs.  Morrisville, NC: LuLu Press.  ISBN: 978-1-387-07026-8 Retrieved from: http://www.lulu.com/spotlight/SBPlan
 [Amazon v4.0e  ASIN: B074JJCDHG Retrieved from: http://www.amazon.com/dp/B074JJCDHG

Strategic Business Planning Company
We Develop the Plans that Every Business Organization Needs
www.SBPlan.com | www.IPplan.com
Blogs: IntellZine | SustainZine | Scenario/DelphPlan
Planning for Sustainable Success

Copyright © 2020 Strategic Business Planning Company

  

Wednesday, September 2, 2020

Who will beat Amazon in the New-Abnormal

The COVID pandemic creates winners and losers. Will it simply accelerated some winners and some losers. As with any recession, it creates destructive innovation. In the sad carnage of the pandemic should lie silver linings. Telework is one. Winners are ZOOM, losers are office buildings. We're spending some time on this concept trying to estimate how permanent this shift to remote work will be and the massive savings (time, fuel, traffic, etc.)

But the focus of this discussion is on the Amazon effect. The death of the department stores in favor of buying online and having a shipper like Amazon deliver to your door. The Forbes article, Amazon has Finally Met its Match, by Stephen McBride got me started on this topic. Even though Amazon is BIG, you can't call it a monopoly because anyone can do it, kinda. They are simply big, the gorilla in the room.

How much has Amazon (AMZN) subscription services (prime, music, unlimited, etc.) increased related to the covid shutdown, how much has Amazon online purchasing increased, and what percentage of that online purchasing will dissipate once things get back to normal. Since we don't think that things will ever go back to "normal" we refer to the post-COVID world of the future as the "new-abnormal". Amazon has more than doubled in a year, reaching an all time high Sept 2, 2020 of $3,552 per share, a market capitalization of $1.8T. Wow!

Amazon became famous in the Intellectual Property (IP) world with the one-click patent.Look away from your screen for just a second, and you could find that you accidentally bought the item(s) you were scanning. That patent expired in September of 2017 allowing everyone to accelerate the purchase process and reduce shopping cart abandonment. Amazon still has had more that 13,000 patents granted (many have expired) and 1,259 applications (according to Justia). That's a pretty significant war chest.

Walmart (WMT) was not doing a good job to compete with Amazon, so they took an extreme measure in 20016 of buying an upstart name JET that was developed from the ground up to compete with Amazon. In 2016 Walmart bought JET for $3B (more discussion here). Walmart has the unique advantage that you can return online orders to the store. An advantage for Walmart is that people who return something at the store, will likely spend that money and more before leaving. Walmart has 1,237 patents and 820 patent applications as of August 2020.

In the August 2020 Forbes article, McBride thought that there would be several winners in the Amazon space. Etsy (ETSY) is a wonderful place for customized products, arts and crafts. Etsy and the artists who utilize their online marketplace excel in this area where Amazon cannot. 

The last one is Shopify (SHOP) a software platform for small and medium sized companies that integrates all of their business. Businesses that have online, storefront and mobile businesses find Shopify works well to bring all the pieces of the business together. Since most small(er) companies have very little online presence, Shopify helps them jump over the intermediate stages of going online and managing all the sales' processes. Shopify hit its all time high Sept 1, 2020 of $1,147, up from its low in November of $282. That's more than a 300% increase! Wow!

Shopify had zero (0) patents in 2015 and only maybe 32 today. Etsy has about 25 patents; many are interesting in the use of fuzzy logic and categorization of products. The stores that use Shopify and Etsy need to build their own intellectual property protection including trademarks, copyrights and patents.

Who do you think will be the winners in the new-abnormal world? Big boom for AMZN, of course. But what about these Amazon competitors in the move away from brick: SHOP and ETSY? And what about the ultimate click-n-mortar: WMT?

#Invest #Stocks #patents #ecommerce #NewAbnormal

Sunday, June 7, 2020

Big winners of Renewable Energy: IP and Manufacturing

Renewable Energy Patents in 2019
As you look at the companies that are winners in Renewable Energy (RE) you have distinct winners (and losers, especially in the fossil fuel world). But there are entire countries that stand to win as well. Several countries have become exporters of energy, for example, when they produce more regional energy than they can use. I like the image set related to 25 areas/countries that are winners in Renewable Energy (at LoveMoney.com, The world’s greenest nations that are reaping the rewards). Here’s Love/Money’s take on China, both in terms of the technology (Intellectual Property) and the manufacturing/exporting:
Of all patents for renewable energy issued globally, as of 2016 China has 29%. That's more than 150,000 patents, which underlines the focus of China's investment in the industry. So it's not a shock that the country has been dubbed a “renewable energy superpower” in a recent report issued by the Global Commission on the Geopolitics of Energy Transformation. The report argued that, as renewables come to fossil fuels globally, new energy leaders will emerge.
The US had only 100,000 patents (vs 150,000 for China) and Europe had 75,000 in renewables according to the Forbesanalysis in Jan 2019.  Overall, patents in renewables has made impressive progress, even though RE patents are only 1% of all patents (and other high-tech categories like computers are about 6%). Check out the great article at the World Intellectual Property Organization (WIPO) on RenewableEnergy patents by James Nurton. More than half of the RE patents through the Patent Cooperation Treaty (PCT) are in solar. Fuel Cell technology has consistently exceeded Wind in terms of patents. Fuel Cell (using hydrogen) is important because it can function as battery, battery backup, stationary power and portable power. Geothermal is trivial are of RE patent activity. When the RE “international” patents (PCTs) are registered at the national level the first three countries are: Japan, USA, and Germany.
On the manufacturing/exporting side, China has been a huge producer of the world’s renewables (solar, wind and more). Here’s how LoveMoneysummarized Chinese production of RE:
 China is currently the world’s largest exporter of solar panels, wind turbines, batteries and electric vehicles. The country is well-suited to wind power production, and it has an estimated potential capacity of 2,380 gigawatts. What’s more, many Chinese companies are investing in renewables.”
Keep in mind that many things sustainable are lower tech, not higher tech. Much, if not most of sustainable solutions does not require break-through solutions. Using less energy can be very low tech (turning the lights out when out). Driving less (by telework) can be no tech. But in the cases where leading tech can be a major competitive advantage, he owners of IP will win.
Look also at GlobalTrends in Renewable Energy Investment in 2019 by UN Environment Program and Bloomberg. Where is RE coming from? The investment from 2010 through 2019 has been $2.6T with 52% in Solar and $41% in Wind.
And the final question: how do we get to 100% renewable energy in a reasonably short period of time?
#RenewableEnergy #REPatents #IntellectualProperty #IntellZine #SustainZine #WIPO #Sustainability #PCT #REInvestment #Solar #Wind #RE100


Thursday, May 21, 2020

Efficient Infringement 2: Which is Bigger Toll? EI or Patent Troll?

In Part 1 on February 13, “Inequality finds a place in IP where Efficient Infringement Runs Wild,” we emphasized the David vs Goliath nature of patent holding startups trying to get justice against a mega-tech infringer.  Infringement is somehow legally transformed because it is efficient – an odd attempt at rationalizing an illegal action. (Note the new location of our IP Zine and all past blog posts are at www.IntellZine.com.) 
Well, just as we acknowledge that, “hope springs eternal,” as Apple’s appeal in an infringement case was rejected (Bloomberg/LA Times, Feb 24, 2020).  The US Supreme Court refused to consider the tech giant’s attempt to avoid paying upwards of $1B in patent damages to VirnetX Holding Company, a Nevada company with less than $2M in annual revenue.  VirnetX somehow managed to tough it out for a decade trying to get Apple to pay royalties on patents for secure communications technology.
Of the long list of things to fix in IP law, efficient infringment is certainly one of them.  Somehow, infringement cases must be settled far more rapidly than today’s decade long slogging through the mud.  The market disappears in ten years, there is no longer revenue available to fight over.
From The LA Times, “The high court denied Apple’s petition arguing that a $439-million judgement from the first of two cases brought by VirnetX was ‘grossly excessive’ and should be thrown out… A second case not currently before the high court, resulted in a $503-million verdict over the same patents and newer Apple products.” (https://www.latimes.com/business/technology/story/2020-02-24/apple-rebuffed-supreme-court-billion-facetime-patent)  
This ruling was nearly one month after a federal jury in Los Angeles ruled that Apple and Broadcom must pay $1.1B in damages to Caltech for infringing on WiFi patents.  That’s right, California Institute of Technology (http://www.caltech.edu/), the university in Pasadena California! What’s a school gonna do with patent technology anyway? Apple was ordered to pay $837M, Broadcom Inc $270.2M.  “It’s the biggest jury verdict of any kind so far in 2020 and the sixth largest patent verdict of all time, according to Bloomberg data.” (https://www.latimes.com/business/story/2020-01-29/caltech-wins-a-1-1-billion-jury-verdict-against-apple-and-broadcom) Apple’s strategy is based on maintaining the Company’s high profit margin which demands fighting for years in various courts.  Does “efficient infringement” ring a bell here?  (The $838M won by Caltech is about one day of sales and 1.5% of the company’s $55.3B net profit in 2019.)
Apple and Broadcom lose Caltech infringement case

But wait, there’s more. Apple’s appeal to the US Supreme Court did not go well for Apple. On March 13, 2020, the US Supreme Court rejected the opportunity to review the case (originating in Texas, of course). The final settlement that Apple agreed to pay was $454M to VirnetX.  Now down to about half a day of sales and 0.8% of the company’s net profit in 2019. Roughly $1 for each of the 400M devices that VirnetX claims patent infringement. (See here for one discussion of case-closed.)
So, Apple argues, essentially, “efficient infringement”, which we will return to in a second. But VirnetX has been ungraciously referred to as a Patent Troll, a Nevada corporation operating out of a Troll Hole in Texas. Here’s an example of articles during the decade by Zack Epstein in the NY Post: https://nypost.com/2018/04/11/apple-ordered-to-pay-half-a-billion-dollars-in-damages-to-patent-troll/
Patent Trolls. The more derogatory term, but sometimes more accurate, is patent troll; other related terms are patent holding company (PHC), patent assertion entity (PAE), and non-practicing entity (NPE). Wikipedia has a good, but not especially strong, page on Patent Trolls. The advantage of going back to Wikipedia is that it is dynamic and usually is updated perpetually by people. This Apple case is in the article, but not updated for 2020. Anyone can update, so please consider going and improving the article.
There is the dilemma to choose between the lesser of two evils: the toll of the patent troll or the stealth of efficient infringement.  It is hard to support VinnetX, and the tolls of patent trolls.  Our values state that deliberate attempts to extort money on less-than-honorable pretenses cannot be condoned.  We have several blogs posts about Patent Troll and their negative impact on innovation and economic productivity.  On the other hand, efficient infringement is the result of a deliberate – with malice of foresight – corporate strategy.  It is callous and predatory.  It is practiced by companies that are unquestioned technical powers and have major share in their markets.  They have uncommon market power and use it with against rivals.  In particular, these companies prey on start-up entrepreneurs if their new technology is a threat or an opportunity.
Neither party is honorable in any way, but the greater of the evils is efficient infringement.  It would be a more positive impact on innovation if efficient infringement became too expensive by way of damages to risk continued practices.  The courts need to look just at the question of infringement and the issue of market power to make this call.
These efficient infringement courtroom dramas go on and on, and on and on. A decade in this case.  Get the picture?  As one of several high-tech giants that are apparently doing the same, Apple doesn’t anticipate any significant downside.  When served a rare injunction, it just moves up the justice stepladder until, if necessary, it reaches the summit.  To be sure, The Supreme Court’s refusal to hear its appeal must have come as a shock.  But, will this change behavior?  Not likely.
Here is another way to cast a harsh spotlight on efficient infringement.  The House of Representatives should hold hearings when these cases like these reach the public eye.  The CEO of the infringing company must be subpoenaed to testify whether or not efficient infringement is an accepted corporate policy; does the company’s board and CEO approve infringement and willingly will pay damages, eventually.  Today, a CEO can hide behind legions of lawyers. Being forced to testify in person just might, might change strategy.  In addition, Congress should make egregious efficient infringement a felony, Grand Theft – Intellectual Property punishable by 5-7 years in prison and forfeiture of revenues and fines for the key decision maker(s): Chair, CEO and CFO.  When enforced, efficient infringement will become a relic of a lesser past.
Here is an afterthought. It is obvious that corporate lobbying and campaign contributions have removed any possibility of Congressional action to strongly deal with infringement today.  As the economy reopens, many things will change.  It would very much benefit the entrepreneur if the legal system enforced IP laws to protect the new technology inventions we will need.
#Patents #EfficientInfringement #Infringement #PatentTroll #Apple #PAE #NPE