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XStartups and Advocates Keep a Hopeful Eye on Biden’s Pick to Run the US Patent Office
Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake

After seven years trying to make it as an entrepreneur, Josh Malone's dreams and savings were running dry. With a growing family, urgency was mounting for his return to the safety and stability of corporate life. Desperate for a final crack, he asked his wife for patience and built one last prototype – a patented device that could quickly fill and tie multiple water balloons at once, which he called "Bunch O Balloons" – and started a Kickstarter campaign.
Malone raised nearly $1 million from 21,000 backers, and was invited on the national TV circuit, including a feature on the "Today Show."
"That's when it blew up," he recalled.
Malone struck a big deal with Zuru, a Los Angeles-based toy company, to exclusively license his patent, and his invention soon lined retail shelves across the country.
But he quickly learned that his patent, which was supposed to grant him legal recourse to prevent others from exploiting his invention for 20 years, hadn't deterred copycats, and that his ability to stop them wasn't as ironclad as he'd expected.
Patents can be the lifeblood of a startup and their immediate future will be shaped by the next head of the U.S. Patent and Trade Office (USPTO), which receives over 600,000 patent applications a year and sets the tone for how the executive branch enforces patent rights. Once small-time players like Google and Intel used patents to shoot ahead in their industries, along with many other founders who've leveraged patents to help raise money and protect investors. If the company fails, they may be able to sell the patents off to others.
Over the last 15 or so years, however, a combination of court decisions, regulatory changes and new legislation has weakened U.S. patent protection, leaving smaller patent owners few ways to prevent others from exploiting their inventions, according to USC law professor Jonathan Barnett.
Since 2006, the trend "has tended to favor the interests of larger firms and firms that use system or platform business models, like Google or Facebook, and disfavor entrepreneurs and firms that focus on innovation but don't necessarily convert those innovations into products for end-users, like Qualcomm, UCLA or BioNTech," said Barnett.
Startups often have a tougher time taking on established companies when patent rights are weakened, Barnett found after examining 116 years of U.S. patent and antitrust history for his latest book.
Patents can help startups raise money and attract partners and open doors to new markets. Established companies, on the other hand, can more easily self-finance commercialization of their innovations, said Bridget Smith, an L.A.-based patent lawyer who recently filed a brief to the U.S. Supreme Court arguing for stronger patent rights. Weaker patent rights often help incumbents fend off new competitors trying to grab a toehold in their market, she said.
As the Biden administration takes office, Smith, Malone and others concerned with how the government wields its patent policies are watching closely to see who will become the new leader of the USPTO.
"There are big debates about who the patent system benefits," said Barnett. Opponents to patent protection argue that patents slow innovation or increase prices, he said, but "empirical data is either uncertain or, in some cases, refutes these claims."
While changes under the outgoing USPTO director have slowly started to tilt the scales back toward stronger patent protection, Barnett said, "it will be interesting to see if the new administration reverts to the policies under the Obama administration, which was more patent-skeptical."
Who Will Be the Next USPTO Director?
It is too early to tell who Biden will pick to lead the USPTO. He has not publicly indicated who his choice will be, and the people he has surrounded himself with so far don't provide many clues about which way his appointee could lean.
Gina Raimundo is a former venture capitalist and current governor of Rhode Island.
On one hand, Gina Raimundo, a former venture capitalist and current governor of Rhode Island, is awaiting Senate confirmation to lead the Commerce Department, under which the USPTO falls. Based on her past career, she is "familiar" with IP and startups, said former USPTO Director David Kappos, suggesting that Raimundo may lean toward an inventor- and startup-friendly patent regime.
There are also indications, however, that Biden could take a harder line on patent-protection. He appointed UC Santa Clara law professor and former Obama IP-advisor Colleen Chien to his transition team, for instance. Chien has previously opposed the STRONGER Patents Act, legislation carried by Delaware Senator Chris Coons (D), who is now chairman of the Senate Subcommittee on Intellectual Property.
Traditionally, the appointment and confirmation of the USPTO director occurs after the secretary of commerce is confirmed. Should Raimundo's appointment go forward, Kappos said the new USPTO director appointee could enter the extensive vetting process by April and assume the position a few months later. At that point, the director will start to implement the direction that the Biden administration wants to take U.S. patent rights.
The Patent-Protection Pendulum
One key issue that the new director will have to weigh in on, and which has had a big influence on the recent push toward weaker patent protection, is how to subdue "patent trolls" — entities that accumulate patents with the sole purpose of suing companies for infringement. In many of those cases, companies settle out-of-court to avoid prolonged and expensive legal battles.
Ten years ago, in response to what he and others saw as "rampant abuse of the system" by patent trolls, Kappos oversaw the establishment of a new entity at the USPTO empowered to retrospectively invalidate patents. The Patent Trial and Appeal Board (PTAB) was hailed by proponents as an efficient and easy process to clean up the patent system, but critics say it went too far.
Particularly under Kappos' successor, former Google executive Michelle Lee, the PTAB "became a killing field for patents," said Brian Pomper, executive director of the Innovation Alliance, a pro-patent trade group that represents companies including Qualcomm and Dolby Labs.
Pomper said a recent series of rulings by the Supreme Court — motivated in part by a fear of patent trolls — has injected an unwelcome uncertainty over what is and isn't eligible for a patent, a sentiment echoed by multiple sources and shared by numerous current and former judges, appointees and legislators.
Smith and Pomper said the upshot of this uncertainty is weaker patent-rights and lower patent values.
Some politicians have taken note. Senator Coons, for example, has said that "U.S. patent law discourages innovation in some of the most critical areas of technology, including artificial intelligence, medical diagnostics and personalized medicine."
Of Balloons and Slingshots
Much of the support for the weakening of patent-protection has been backed by big tech lobbying at the expense of smaller, would-be competitors, according to critics like intellectual property lawyer Robert Taylor.
"In the matchup between David and Goliath, Goliath didn't need a slingshot; he only had to take David's away from him," said Taylor. "That's what large tech companies are doing with respect to small companies' patents."
It was against this backdrop that Malone's patent litigation battle unfolded.
Not long after Bunch O Balloons had arrived on retail shelves nationwide, TeleBrands – a large firm that invented the "As Seen On TV" method of selling products through pitchmen like Billy Mays – began selling a knock-off product.
From 2015 to 2019, Zuru, the L.A.-based company that had licensed Bunch O Balloons, pumped almost $100,000 a week into litigation and attorney and expert fees to sue TeleBrands, ultimately spending "$20 million in legal costs fighting over a stupid water balloon intellectual property," Malone said.
Ultimately, they prevailed. TeleBrands and several retailers were ordered to pay Malone and Zuru $31 million for infringing on their patent. They were also forced to permanently stop selling the knock-off product. Bunch O Balloons has now done nearly half a billion dollars in total sales.
Malone, who has since gone on to work as a full-time volunteer for patent-protection advocacy group US Inventor, says he is a rare exception. If not for his deep-pocketed backer, he said, he would have been another victim of an intellectual property system that he sees as rigged against the little guy.
"The average patent trial is about $450,000," said Smith. "That's nothing to FAANG companies, but that could eat up a startup's entire funding."
Adding more certainty over patent-eligibility and mitigating the power of the PTAB to invalidate patents are steps that the outgoing USPTO director, Andrei Iancu, took to strengthen patent protection. These decisions, Smith said, helped provide confidence to investors and lawyers working on contingency that it's worth putting up the fight against infringers.
Such changes were never codified into law, however, and the next director could take a new approach.
"There really is a chance to make a break (from weaker patent-protection), or do business as usual," Smith said.
Malone hopes for a course correction from what he and others view as an overreaction. "The problem with the efforts to stop the so-called patent troll is that they have thrown the baby out with the bathwater," he said.
The new USPTO director will inherit that legacy – and the power to decide what to do about it.
Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
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Plus Capital Partner Amanda Groves on Celebrity Equity Investments
On this episode of the L.A. Venture podcast, Amanda Groves talks about how PLUS Capital advises celebrity investors and why more high-profile individuals are choosing to invest instead of endorse.
As a partner at PLUS, Groves works with over 70 artists and athletes, helping to guide their investment strategies. PLUS advises their talent roster to combine their financial capital with their social capital and focus on five investment areas: the future of work, future of education, health and wellness, the conscious consumer and sustainability.
“The idea is if we can leverage these people who have incredible audiences—and influence over that audience—in the world of venture capital, you'd be able to help make those businesses move forward faster,” Groves said.
PLUS works to create celebrity partnerships by identifying each client’s passions and finding companies that align with them, Groves said. From there, the venture firm can reach out to prospective partners from its many contacts and can help evaluate businesses that approach its clients. Recently, PLUS paired actress Nina Dobrev with the candy company SmartSweets after she had told them about her love for its snacks.
Celebrity entrepreneurship has shifted quite a bit in recent years, Groves said. While celebrities are paid for endorsements, Groves said investing allows them to gain equity from the growth of companies that benefit from their work.
“Like in movies, for example, where they're earning a residual along the way, they thought, ‘You know, if we're going to partner with these brands and create a tremendous amount of enterprise value, we should be able to capture some of the upside that we're generating, too’,” she said.
Partnering in this way also allows her clients to work with a wider range of brands, including small brands that often can’t afford to spend millions on endorsements. Investing allows high-profile individuals to represent brands they care about, Groves said.
“The last piece of the puzzle was a drive towards authenticity,” Groves said. “A lot of these high-profile artists and athletes are not interested, once they've achieved some sort of level of success, in partnering with brands that they don't personally align with.”
Hear the full episode by clicking on the playhead above, and listen to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.
dot.LA Editorial Intern Kristin Snyder contributed to this post.
Rivian Stock Roller Coaster Continues as Amazon Van Delivery Faces Delays
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Rivian’s stock lost 7% yesterday on the back of news that the company could face delays in fulfilling Amazon’s order for a fleet of electric delivery vans due to legal issues with a supplier. The electric vehicle maker is suing Commercial Vehicle Group (CVG) over a pricing dispute related to the seats that the supplier promised, according to the Wall Street Journal.
The legal issue could mean that Amazon may not receive their electric vans on time. The dispute hinges on whether or not Commercial Vehicle Group is allowed to raise the prices of its seats after Rivian made engineering and design changes to the original version. Rivian says the price hike from CVG violates the supply contract. CVG denies the claim.
Regardless, the dispute could hamper Rivian’s ability to deliver electric vans to Amazon on time. The ecommerce/streaming/cloud computing/AI megacorporation controls an 18% stake in Rivian as one of the company’s largest early investors. Amazon has previously said it hopes to buy 100,000 delivery vehicles from Rivian by 2030.
The stock plunge marked another wild turn for the EV manufacturer. Last week, Rivian shares dropped 21% on Monday after Ford, another early investor, announced its intent to sell 8 million shares. The next few days saw even further declines as virtually the entire market saw massive losses, but then Rivian rallied partially on the back of their earnings report on Wednesday, gaining 28% back by Friday. Then came yesterday’s 7% slide. Today the stock is up another 10%.
Hold on tight, who knows where we’re going next.
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Snapchat’s Attempt to Protect Young Users From Third-Party Apps Falls Short
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Some Snap Kit platform developers have skirted guidelines meant to make the app safer for children.
A new report from TechCrunch released Tuesday found that some third-party apps that connect to users’ Snap accounts have not been updated according to new guidelines announced in March. The restrictions, which target anonymous messaging and friend-finding apps, are meant to increase child safety. However, the investigation found a number of apps either ignore the new regulations or falsely claim to be integrated with Snapchat.
The Santa Monica-based social media company announced the changes after facing two separate lawsuits related to teen suicide allegedly caused by the app. Over 1,500 developers integrate Snap features like the camera and Bitmojis. Snap originally claimed the update would not affect many apps.
Developers had 30 days to revise their software, but the investigation found that some apps, such as the anonymous Q&A app Sendit, were granted an extension. Others blatantly avoided the changes—the anonymous messaging app HMU, which is now meant for adult users, is still available to users "9+" in the App Store. Certain apps that have been banned from Snap, like Intext, still advertise Snapchat integration.
“First and foremost, we put the privacy and safety of our community first and expect the products built by our developer community to adhere to that standard in addition to bringing fun and positive experiences to people,” Director of Platform Partnerships Alston Cheek told TechCrunch.
The news is a blow to Snap’s recent efforts to cast itself as a responsible social media platform The company recently announced Colleen DeCourcy would take over as the company’s new chief creative officer and CEO Evan Spiegel to recently made a a generous personal donation to graduates of Otis College of Art and Design. The social media company currently faces a lawsuit from a teenager who claims it has not done enough to protect minors from sexual exploitation. In April, 44 attorney generals sent a letter to Snap and TikTok urging the companies to strengthen parental controls.
Lawmakers are considering new policies that would hold social media companies accountable for the content on their platforms. One such bill would require social media companies to share data with independent researchers.
Snapchat recently rolled out augmented reality shopping features and influencer-led original content to grow its younger base of users.
Snap Inc., Snapchat's parent company, is an investor in dot.LA.
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.