Pigeon Power!

Why establish your startup in France?  Why invest there?  

On April 12, 2013, the French government reportedly rejected Yahoo’s bid to acquire 75% of a leading video sharing website Dailymotion, owned by Orange, a subsidiary of France Telecom, S.A.  The ostensible reason was that control of a crown jewel of French Internet startups should remain in France.  No great French Internet company should lose its French identity.  The French government owns a 27% stake in France Telecom, S.A.

This result will only harm the French economy by encouraging French entrepreneurs and SMB’s to seek venture capital, growth opportunities and technologies outside of France.   This comes after a year of hostile words by Arnaud Montebourg, France’s Minister of Industrial Renewal  (“productive renewal”) against foreign steelmakers and others who might bring in foreign investment and foreign business methods for French industry.  It will deprive Dailymotion of capital investment needed for sustainability and growth.

Having studied, lived and worked in France, and as a tech business lawyer in New York, I offer my own lament to French entrepreneurs and SMB’s in their own tongue.  (If you only studied French in high school, try www.translate.google.com for a breezy translation.)

Où bâtir votre startup français?   Evidemment, la France ne vous accueille pas. 

C’est ça le message du gouvernement de François Hollande, dont le Ministre du Redressement Productif Arnaud Montebourg a refusé le 12 avril 2013 de permettre à la startup Dailymotion de se vendre le contrôle à Yahoo, Inc.  Le Ministre aurait permis la vente de 50% mais pas le 75% convenu entre la « startup » vedette française Dailymotion (fondée en 2005) et Yahoo. 

Quelles seront les conséquences de la « fin du capitalisme libre» que M. Montebourg a annoncée en 2012 ?  

D’abord, les entrepreneurs français (et leurs investisseurs, comme les « anges d’affaires » (Business Angels) et les fonds de capital risque) vont croire que les subventions et certaines baisses prioritaires de taux d’impôts, récemment annoncées en France, sont illusoires.  On va conclure qu’il vaut mieux établir les moteurs de croissances dans les pays étrangers des « Pigeons ».   L’Ireland, le Canada et, bien sur, les Etats-Unis vont les accueillir avec des visas d’entrepreneur, de startup, d’investisseur et de commerçant.  Sous Hollande, la fuite des cerveaux, des jeunes et des PME va s’accélérer.  Même s’ils ne se délocalisent pas personnellement pour des raisons de famille, les PME pourront établir des sociétés affiliées étrangères dans de tels pays d’accueil, où il trouveront du capital risque (venture capital), des marchés, des taux d’impôts raisonnables et le droit du travail plus équilibré que devant les tribunaux de Prud’hommes. 

Ensuite, déprimés par un dirigisme protectionniste en France, les prix de vente pour les PME français vont rester en dessous des niveaux atteints normalement dans d’autres pays.  

Enfin, au lieu de préserver la façon de vivre, et de protéger les mœurs et coutumes français, ce gouvernement de François Hollande va vider la France des personnes qui auraient soutenu autrement sa place de leader dans les économies européennes et mondiales. 

Et je ne parle as des obligations de la France d’ouvrir des portes à l’investissement étranger sous la convention de l’OMG (WTO) sur les investissements portant sur le commerce international.   Non, je me tais.  Je ne veux pas condamner la France du non-respect de la lettre des lois.   Montesquieu m’a enseigné quand même « l’esprit des lois. »

In short, look around.  Chercher le business là où vous êtes bien accueilli. 

The Hot “New” Value of Copyrights for SaaS and other Software Apps

What’s the most cost-effective, practical way to protect intellectual property for your cool mobile app or your SaaS e-business?   The answer just changed as of March 16, 2013.   

Since this date, getting patent protection became harder.  Now, the first inventor to file a patent application will be recognized as the inventor of this U.S. patent, and the “first to invent” priority rule will no longer apply under the America Invents Act, enacted September 16, 2011.  A number of other changes became effective as well:  “prior art” now includes foreign publications.  In short, getting a U.S. patent will require more vigilance and investment in the patenting process.  And enforcing/defending a patent could still cost over $1.0 million or more. 

So is now the right time for a resurgence of copyright applications for software to protect intellectual property rights?   Yes, perhaps.  While copyrights cannot replace patents as a legal monopoly, for the smaller business or entrepreneur with limited funding and wanting a quick certification of ownership, copyright offers a simple, cost-effective solution. 

Unlike patents (which protect innovative ideas), copyrights only protect the particular expression of an idea, such as a story, or a software application.  There is some room for additional copyright protection against plagiarized “derivative” works, but not much, since the author of the “derivative” work need only show a minimal level of originality to defeat a claim of plagiarism. 

But, copyrights still have a lot of value.  A copyright owner can prevent others from copying and marketing clone software or even a clone product catalog.  You don’t need to register to own the copyright, but registration helps with enforcement.  The owner of a registered U.S. copyright can sue for damages and collect attorney’s fees.  (Owners of trade secrets can only sue for damages and normally cannot collect attorneys’ fees).  And you can register the copyright with U.S. customs authorities to prevent the importation of infringing products.  All this is a powerful incentive for preventing knock-offs.  The U.S. online copyright filing fee is only $35 per basic claim of authorship.

But, done wrong, registering a copyright can risk losing trade secret and/or patent rights.  If you deposit a copy of your source code for the app with the U.S. Copyright Office, it risks making public your confidential secret sauce, which would normally defeat trade secrecy and could endanger an unfiled patent application.  Done right, however, your copyright registration can avoid that risk by careful planning and limited disclosure of the secret sauce. 

Your copyright registration program should fit within a more holistic overall program to protect intellectual property including trade secrets.  The copyright deposit materials could be machine-readable object code, so that it becomes indecipherable without an operating system and a computer language.  Or the deposit materials could be fractions of a printout of the code.  All you need to do is prove that it compiles, and do it in a manner that prevents anyone from decoding.   Special rules apply, though, for apps that are derivative works or include some open-source components.

For low-cost and high legal value, copyright registration may become the method of choice for entrepreneurs and small app developers.   Patents should still be pursued as a defensive measure, but copyrights can be an important part of the plan.