Thursday, August 25, 2011

Proposal for Ending Housing Crisis

In 2008, the housing bubble burst leading to a financial crisis that sent the economy into a tailspin, drying up liquidity. Home values have dropped precipitously and continue to drop in many major housing markets. The housing bubble was caused by government policy to keep mortgage interest rates low and to encourage sub prime lending practices that increased home "ownership" across America. If the government didn't directly cause the housing bubble, its policies certainly encouraged the inflation in housing prices and development of a market in mortgage-backed securities that turned the inevitable correction into a financial crisis. The deep recession led to unemployment, which increased home loan defaults and mortgage foreclosures, causing home prices to drop further, to the point where existing homes now sell for substantially less than its costs to build homes.

The government stimulus passed by the President and the democrat-controlled House of Representatives and Senate did nothing to address the precipitous decline in the assessed value of homes, which caused the financial meltdown.

Michael Lissack, a famous (or infamous to some on Wall Street) whistleblower who once worked for Smith Barney, has proposed a solution to the underlying problem that is holding back America's economy. He proposes a mechanism that will establish a new floor for home valuations for the majority of homes that are now underwater (assessed value of home is less than the amount of the home loan). He proposes the following:

1. Refinance 80% of current assessed value of homes in a conventional conforming loan / first mortgage.
2. Provide a second mortgage (Lissack proposes a zero-interest loan) for the difference between the second mortgage and 100% of the current assessed value of the home.
3. In exchange for the write-down to the current assessed value, allow for banks to hold an equity interest in the up-side of the home, when sold, if any. Lissack proposes a standardized, stand-alone contract (and presumably a lien that must be satisfied at closing) for 50% of appreciation above the current assessed value of the home.

Presumably, all home owners would be allowed to participate in this program, and the mortgage companies and banks would be either encouraged or required to participate. As a result, all homes would no longer “underwater” immediately. Monthly mortgage interest and principle payments would be reduced, and the freed up cash would be available to stimulate the economy. The second mortgage and equity sharing contract would be a future cost to the home owner, but this cost would only be incurred upon selling of the home for a price above the current assessed value. This would put a floor on home values at current prices, encouraging a return to a stable housing market.

Lenders could look forward to the equity-sharing return on investment to partially offset the loss caused by writing-down home loans to current market prices, instead of taking losses in foreclosure sales that continue to drive down home values.

It would be an interesting exercise to compare the costs of Lissack's proposal to financial institutions compared to the continued uncertainty and costs of foreclosures. The primary and secondary mortgages and equity-sharing arrangements could be pooled and sold into the capital markets, particularly as housing prices start to rebound.

Possibly, the economic result for the lender would be far better than the costs of foreclosing on homes, which Lissack estimates incur 30%-40% reductions in current values.

Tuesday, August 2, 2011

9-11-01 Ten Years Later

I returned to New York from Santorini, Greece, the day before. My vacation was interrupted due to pressing matters that could not wait.

On 9-11-01, I was walking to work at One Broadway, when the first plane hit the N. tower. A gaping hole opening up with leaping flames. Pedestrians with their faces and eyes locked on the catastrophe stood frozen, awestruck, but at that point we didn't know it was an intentional act of terrorism.

I proceeded to work, which was only a few blocks from the twin towers. As I neared One Broadway, a second commercial airliner blasted its way into the S. tower. Even though I was walking on the street several blocks away on the opposite side of a high rise, I sensed the blast, burning paperwork drifted down around me from the offices impacted by the exploding air-fuel mixture released by the disintegrating aircraft as it merged with the S. tower. A taxi stood motionless on Broadway. Its driver listening to the radio. When I asked what had happened, he explained that planes were crashing into tall buildings all over the city and at the Pentagon too. Although erroneous in the details, this report made clear that our nation was under attack.

I continued on my way. I took the elevator to my office on one of the top floors of One Broadway to collect some paperwork and to email friends and family that I was OK, because my cellphone wasn't working. Before I could click send, the first tower fell. A pyroclastic cloud of ash and dust entombed the financial district, turning day into night, made darker still by the immediate loss of electricity, phones, Internet and continued absence of cellphone signals. I stuffed my files in a red backpack that I normally used for law books; I was a full-time patent agent and legal intern, attending my last year of law school, at nights.

Proceeding to the nearest stairwell, I met a panicked administrative assistant, calmed her and helped her to evacuate the building, nine floors down a dark stairwell in an historic building considered to be one of New York's first skyscrapers. The lobby guard had closed the entrance, afraid to let anyone outside in or anyone inside out. Pieces of fluffy flotsam drifted in the smoke, dust and ash that had once been a clear, late-summer sky. After waiting too long without information, I convinced the guard to allow me to leave and to allow desperate tourists from the Ellis Island tour boats sanctuary in our lobby.

Two disoriented tourists decided to join me on my expedition northward, out of the financial district. The second tower came down before we made much progress, and a churning cloud of choking dust and ash advanced up one of the cavernous streets in our direction. My band took refuge in a bank lobby.

After some time huddled in our refuge, the density of the dust dissipated enough to continue the expedition northward. All were now covered in a fine gray dust in a surreal landscape. A makeshift first aid station passed out dust masks to passersby. A corner bodega passed out free bottled water. Nearing the Brooklyn Bridge, we finally emerged from the dust cloud, and, for the first time, I was stunned to see that the towers were no more.

After directing my companions toward the bridge to Brooklyn and safety, I turned westward toward my home in the West Village. It would take more than an hour navigating checkpoints and barricades before reaching my 350 square foot West Village apartment, where I could shower away the dust that covered me. Then, I went to the Internet cafe on Bleeker Street to finally let those concerned about me know that I was fine.

In the weeks to come, I would become numb to the horror of so many faces of missing loved ones posted on bus stops and hospitals. The checkpoints and barricades eventually disappeared. Even the seemingly never-ending columns of smoke rising from ground zero eventually were extinguished, but I would never be the same. New York would never be the same.

The pressing matters that drew me back early from my vacation in Greece, just the day before, no longer mattered so much.

Tuesday, July 5, 2011



Population Distribution by Age in 5-year increments for Tampa-St Pete-Clearwater. Interesting that the peak years in the boom is the 45-to-50 year olds. The 45-55 block in this demographic will see benefits reduced or the retirement age extended for Medicare and Social Security (or both). Will housing prices rebound by retirement age for this block of middle-aged boomers? Will there be a market for single family homes, then, allowing these late-boomers to cash out?

Thursday, June 9, 2011

Sigmoidal Curve

8 Tenets for Entrepreneurial Success -- Embrace Failure

1. Be honest with yourself, your investors, your employees and your customers.
2. Know your business better than anyone, and know your customers best.
3. Have a product or service that your customers need.
4. Manage cash flow; seek early sales and revenue; always innovate and improve.
5. Leave customers wanting more, but don’t make them wait too long.
6. Embrace failure:
• an uncompromising teacher;
• a requisite step for innovation;
• a crucible for character.
7. Work harder than anyone; and
8. Selflessly lead your team to achieve timely business goals, notwithstanding inevitable failures.

Entrepreneurs fail, sometimes early and often. Honest entrepreneurs embrace their failures, learn from their failures, innovate and improve products and services based on their failures, and take ownership of their failures, without excuse. An entrepreneur knows the business and inspires others, within the crucible of failure, to rapidly retool and redirect efforts toward success. Life and business are uncertain. However, attracting new customers, while keeping existing customers loyal and satisfied, leads to a predictable revenue growth. The sigmoidal curve, above, illustrates a statistically predictable exponential rate of growth, early, and eventually market saturation.

The slow growth during a start-up phase and exponential revenue increase during a rapid growth phase is a predictable pattern for entrepreneurial businesses. Work hard, know your customers, have products or services that customers want, deliver goods and/or services that leave customers wanting more, constantly improve, constantly innovate, concentrate on sales and revenue, and manage your cash flow. These business basics are essential to any company. To be a successful entrepreneurial company, never settle for failure. Learn from mistakes and move on smartly.

To be entrepreneurial is to embrace failure, to learn from failure, to improve and create even more loyalty among customers, employees and investors, based on constant innovation and improvement, within the crucible of failure. Entrepreneurial success is only to be gained by 100% perseverance, followed by another 100% and another and so on.

 

 


FWBlogo

Christopher Paradies, Ph.D.

Registered Patent Attorney

Board Certified Intellectual Property Attorney
Fowler White Boggs P.A.
501 E. Kennedy Blvd, Suite 1700
Tampa, Florida 33602
Direct: 813 222 1190
Fax: 813 229 8313
www.fowlerwhite.com

 

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Thursday, May 26, 2011

Inherent and But For Materiality

Inequitable conduct defenses are being retooled after a recent decision by the Court of Appeals for the Federal Circuit. See 08-1511.pdf on http://www.cafc.uscourts.gov/. Therasense and Abbott won their appeal of a district court finding of inequitable conduct, but the appellate court took this opportunity to adopt a new standard for materiality.

The Court of Appeals for the Federal Circuit has changed the materiality standard for acts of omission before the patent office to "but for" materiality, while apparently adopting "inherent materiality" standard for sufficiently "egregious" affirmative acts, such as fraudulent affidavits and schemes to defraud the patent office. However, a "sliding scale" of materiality and intent is rejected by the entire panel. How will "egregious" affirmative acts be distinguished from affirmative acts that are not egregious? To be determined, if the United States Supreme Court allows the majority opinion to stand long enough for egregiousness to be litigated.

Monday, May 23, 2011

How To Be An Entrepreneur

1. Be honest with yourself, your investors, your employees and your customers.
2. Know your business better than anyone, and know your customers best.
3. Have a product or service that your customers need.
4. Manage cash flow; seek early sales and revenue; always innovate and improve.
5. Leave customers wanting more, but don’t make them wait too long.
6. Embrace failure:
• an uncompromising teacher;
• a requisite step for innovation;
• a crucible for character.
7. Work harder than anyone; and
8. Selflessly lead your team to achieve timely business goals, notwithstanding inevitable failures.

Entrepreneurs fail, sometimes early and often. Honest entrepreneurs embrace their failures, learn from their failures, innovate and improve products and services based on their failures, and take ownership of their failures, without excuse. An entrepreneur knows the business and inspires others, within the crucible of failure, to rapidly retool and redirect efforts toward success. Life and business are uncertain. However, attracting new customers, while keeping existing customers loyal and satisfied, leads to a predictable revenue growth. The sigmoidal curve, above, illustrates a statistically predictable exponential rate of growth, early, and eventually market saturation.

The slow growth during a start-up phase and exponential revenue increase during a rapid growth phase is a predictable pattern for entrepreneurial businesses. Work hard, know your customers, have products or services that customers want, deliver goods and/or services that leave customers wanting more, constantly improve, constantly innovate, concentrate on sales and revenue, and manage your cash flow. These business basics are essential to any company. To be a successful entrepreneurial company, never settle for failure. Learn from mistakes and move on smartly.

To be entrepreneurial is to embrace failure, to learn from failure, to improve and create even more loyalty among customers, employees and investors, based on constant innovation and improvement, within the crucible of failure. Entrepreneurial success is only to be gained by 100% perseverance, followed by another 100% and another and so on.

Friday, January 21, 2011

Attorneys Fees and Costs in Exceptional Patent Cases

35 U.S.C. § 285 provides for attorneys fees and costs, under exceptional circumstances in a patent litigation. This section must be interpreted against the back-ground of the Supreme Court’s decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Indus-tries, Inc., 508 U.S. 49 (1993). The right to bring and defend litigation implicates a party’s First Amendment rights. Therefore, allegedly frivolous conduct can only be sanctioned if a lawsuit is “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.” Id. at 60. “Only if challenged litigation is objectively meritless may a court examine the litigant’s subjective motivation.” Id. In determining whether a particular litigation is “exceptional” under § 285, the relevant standard is set forth in Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378 (Fed. Cir. 2005). An award of attorneys’ fees is permissible “when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions.” Id. at 1381. A court must find both (1) that a litigation was objectively baseless and (2) was brought in subjective bad faith. Id.; see also Wedgetail Ltd. v. Huddleston Deluxe, Inc., 576 F.3d 1302, 1304–06 (Fed. Cir. 2009) (refusing to find patentee’s unsuccessful case exceptional under Brooks Furniture).

According to the Court of Appeals for the Federal Circuit in a recent decision in iLOR v. Google, an “…infringement action ‘does not become unreasonable in terms of [§ 285] if the infringement can reasonably be disputed,” citing Brooks Furniture, 393 F.3d at 1384. The patentee’s case must (1) have no objective foundation, and (2) the plaintiff must actually know this. And both the objective and subjective prongs of the test “must be established by clear and convincing evidence.” iLOR citing Wedgetail, 576 F.3d at 1304.

Furthermore a “presumption that the assertion of infringement of a duly granted patent is made in good faith” exists. See Id. citing Brooks Furniture, 393 F.3d at 1382 (citing Springs Window Fashions LP v. Novo Indus., L.P., 323 F.3d 989, 999 (Fed. Cir. 2003)). The plaintiff’s state of mind is irrelevant to the objective baselessness inquiry. See Id.; Seagate, 497 F.3d at 1371 (“[S]tate of mind of the accused infringer is not relevant to [the] objective inquiry.”). “Only after this objective baselessness is established by clear and convincing evidence is the subjective bad faith of the plaintiff at issue.” Id. See Id., stating “…we conclude that a finding of objective baselessness has not been met here, and we need not consider the issue of subjective bad faith.” According to the Court of Appeals for the Federal Circuit, the “question is whether iLOR’s broader claim construction was so unreasonable that no reasonable litigant could believe it would succeed”); citing Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008). Under this standard, the defendant’s bears a heavy burden to show that a claim construction is so unreasonable that no reasonable litigant could believe that plaintiff would succeed. Where as in iLOR, the claim construction issues are complex and no summary judgment of noninfringement is granted, it is very difficult to meet the movants heavy burden to show objective baselessness by clear and convincing evidence.

Uniloc Overrules the 25% Rule

A decision in Uniloc USA, Inc. v. Microsoft Corporation overruled any use of the 25% rule as a legitimate rule of thumb in determining a reasonable royalty. Instead, damages experts are left with the Georgia-Pacific factors. In particular, looking at royalties paid or received in licenses for the patent in suite or in comparable licenses and looking at the portion of profit that may be customarily allowed in the particular business for the use of the invention or similar inventions may be the sole legitimate basis for commencing a determination of a reasonable royalty in hypothetical negotiations. It is not clear that this evidentiary ruling will reign in excessive damages based on flawed calculations of unrealistic royalty calculations, but the decision in Uniloc should make it more difficult for experts to hand wave and rule of thumb their way to a reasonable royalty.