Swiss-style Basic Income and IP

To the ill-informed, "Basic Income" is a social security system in which the government regularly gives each citizen a sum of money — with no conditions. No questions asked, no obligations. 

There is a referendum in Switzerland, which if passed would give each adult resident the equivalent of 2750.00 dollars a month. You can read the proponents thoughts here.  In short, the theory is, without the necessity to obtain income necessary to live, people could make more resumed choices about their careers. They could made different choices about how they spend their time. As a result, you might have a more efficient economy. 

Obviously, there are people, including economists, who think this is a terrible idea. The argument against Basic Income is that the whole system will collapse in a morass of lack of motivation to actually work. People will move their expenses down to the level of the Basic Income and then forego employment. Opting instead, it is argued, to just sit around all day. 

I take no position on which one of these outcomes is likely (or the likeliness of this idea gaining traction in the US). Wikipedia has a good run-down on the pros and cons.  However, I do take a position on the economic outcome of people sitting around. I tend to lean on the side of "that's great". 

Why? Because people freed from the restraints of taking ANY job to make ends meet, will naturally gravitate towards their hobbies. When people focus a lot on their hobbies, they tend to turn those hobbies into occupations. We see that with the craft "everything" movement. A zest for baking becomes a bake shop, a thirst for brewing your own beer becomes a craft brewery. A love of reading has become self-published media empires (Ed. a bit close to home....).

Freeing everyone from the constraints of occupation would lead to some people just sitting around. It would also lead to an explosion of new businesses financed by the Basic Income. 

Some of these new businesses would create new works of intellectual property. New artistic, musical, literary works; new software platforms; new devices and new methods could all spring from Basic Income. These works could be licensed world-wide; generating taxable revenue to feed back into the Basic Income system. 

Many Venture Capital organizations have an "Entrepreneur in Chief" position - a person paid to basically think stuff up. We are constantly being told that America needs more "innovation" and "entrepreneurship" and that IP is a step in the wrong direction. Basic Income matched with IP might allow the America to realize the dream of being a "Start-up" Nation where everyone is paid to "think stuff up."

Scammers Part 3 "Astro Boy" edition

Reporting on scams has become something of a tradition around here. In order to pull off a good con, the scam artist needs to know something about the psychology of its mark.

 It does the con-artist no good to offer to split a giant pile of bacon with a vegan (however delicious that concepts sounds). 
So to, do IP scammers know their audience. 

While not a new scam, the following letter was recently received in our offices: 

From: Osamu Tezuka Makoto [mailto:osatemakoto@gmail.com]

Sent: July 30, 2013 1:11 PM

To: Firm

Subject: Legal Rep

Dear Attorney,

We are a media publishing company in Japan. We have a breach of intellectual property agreement matter in your jurisdiction, we can forward you the agreement and 5195842743_2305>

Yours Sincerely,

Osamu Tezuka Makoto

Tezuka Production Company

4-32-11, Takadanobaba

Shinjuku-ku, Tokyo 169-075

Japan

Tel: +81333716411

Email: osatemakoto@gmail.com

http://tezukaosamu.net/jp

After some further digging the "client" told us that :

"We are  the owner of rights in a collection of animated characters including Astro Boy.  Springer Publishing of New York City failed to make a required payment upon termination of an intellectual property agreement between the us ."  

On its face, it seams like a golden opportunity  You, sitting in your office, business development book out to the "how to attract clients" chapter, gets this e-mail. You think, "sweet!" all that networking is paying off. Not only with new clients, but internationally famous IP clients. You do some due diligence, both the company, the IP and the opposing party seem legit.  Or do they. Why would a production company trading in a famous brand like Astro Boy communicate with a gmail address. Why would they contact you out of the blue, with no preface or introduction. Why call you "attorney"? 

The details of how this scam plays out differ from mark to mark, but the concept is pretty simple. Tezuka and Sterling (even though these are real valid companies) are setups, honey pots. You are supposed to Google them, see they are real, and rub your hands together in expectation of easy and significant billings. 

In reality, the contact info above, and the contact info they give you for the point of contact at "Sterling" are to the same entity. Once you negotiate a settlement, with a hefty retainer for your trouble, the money gets transferred to your firms' bank-account by a very slow validating banking institution. 

Because the client and the opposing counsel are the same entity, they know when the "money" was transferred  You, the successful hard litigating, hard negotiating lawyer, soon gets a call from the grateful client asking you to forward the money, minus your fees, of course. 

Now, some attorneys will wait until the check has fully cleared before sending on the money. Some will resist, until the client mentions that there are other people who owe them money, and they would like to retain you for future matters.  Either way, some lawyers will send a check, secure in the knowledge that the money in is the bank. 

The problem is, that the money isn't in the bank.  That slow moving bank transfer suddenly shows up as a cancelled check. Now the firm is out some hundreds of thousands of dollars. When you call Sterling and Tezuka, neither of them have ever heard of you. They have their own lawyers, who are you? You have to go to the Executive Committee and explain why you gave away the farm for some magic beans.  

You, my friend, have been scammed. Something for nothing is usually that...

Market Forces

No, this post is not about the excellent Tech-futuristic thriller by Richard K. Morgan (although it is awesome and can be found here)

In light of the continuing mess at Dewey ( if you are unaware, see here, here and here) it is probably helpful to think about price discovery schemes for associate compensation in the current job market.

If you weren't aware, the job market for associates (new and old alike) is going through what economists call a "Market Clearing".  This is just fancy way of saying that the supply is currently outstripping demand, and either the supply will need to contract, or the price for the supply will have to come down.

If you have spent anytime talking to the management of larger law firms, you know that there is no such thing as a permanent decline in salary for associates. The reputation deficit that comes from such a move is considered to be far more damaging than the price savings. Now, this does not mean that it doesn't happen.  In the dark days of '08-'10, many a law firm took the "lowered tier" option of differential associate payments and tried to spin them as some sort of revolution in Associate salary / price discovery.

 However, most associates are not in a position where they are given the option of voluntary wage cuts in exchange for continued employment. The end result is that the price discovery is impossible in the legal market, and the only way to get the market clearing effect is to reduce the supply of associates, often through forced attrition.

However, there is an alternative:

The alternative would be to allow the associates who are performing at an acceptable level to continue to work at the firm, but at a greatly reduced salary.

It would be possible to retain two associates for the price of 1. Basically, offering two similarly situated associates the ability to "share" their salary and maintain employment.  For high-year associates, it is possible to still obtain a 6-figure income on that 1/2 share. This allows the human capital developed by the firm to still be utilized, and the associate to avoid the stigma of a growing employment gap on their resume.  Unfortunately, the current practice of picking one associate and dismissing the other does nothing to help discover the true price of the associate and results in a wasted investment for the firm.

Either way, the lack of utilization of human capital (in the form of associates) is something that the legal profession is going to have to come to grips with.

Jordan

Declining Prospects

 This is not really a post on anything other than the up-coming book by Michel Trotter titled "Declining Prospects".  If you have been paying attention in the legal sections of the NY Times and Wall Street Journal, you know that the once venerable white-shoe firm "Dewey & LeBoeuf" is on the verge of collapse.  One of the reasons is what I called in a previous post "The Maw".  That incessant desire to increase compensation in the face of declining client willingness and decreased economic opportunity. 

I am no Harvard trained economist / lawyer, but Michel Trotter is. Judging by his interview regarding the future of the legal profession found here, we are of the same opinion on the ills facing future. I for one am looking forward to reading his book, available "soon" from Amazon. Hopefully a lot of the senior partners in the Big Law are as well. 

~Jordan Garner  

Some thoughts on "The Maw"

I have been away for a while, work at Leason Ellis (now, I think the biggest IP boutique firm between NYC and Boston) has kept me really busy.  However, I was once told that the most important time to get your ideas out is when things are going well.

Unfortunately, things are not going well for a lot of lawyers out there (IP specialists included). The causes for this are likely beyond my ability to describe, but a major factor is what I call "cost per lawyer per unit work". In the old days, law firms wouldn't compete with one another using cut rate pricing. The supply / demand curve of reputable attorneys wasn't tilted in favor of supply. Now, through the founding of dozens of new law schools, the supply metric has gone exponential. The rate of growth of lawyers does not match the rate of growth of law firms, or the general economy.  The end result is that you will have more lawyers looking for the same opportunities.

Clients, knowing this, use their leverage to bring down the cost of services.  Normally, this is just a feature of capitalism, and no one should be surprised.  However, in law firm models, forcing down the price does more than cut into a specific partner's profits.  It cuts into the firm profits. As firm profits begin to constrict, the "Rain Makers" start looking for another ship to sail (we can have a discussion on how Partners became "Armies of One" some other time). Once some of the big guns leave, the firm profits begin to contract severely. Associates, staff attorneys, paralegals all begins to fall to the budget ax. This collectively aggressive consumption of the internal human capital is a feature I call the "The Maw".

 The Maw can, and will (I have experienced it first hand) chew through the entire professional rank of a law firm without ever solving the fiscal difficulties of the Partnership. The preferred response once the Maw has begun to consume staff is to throw larger and larger supplicants into the abyss, in hopes of appeasing its hunger. This never works. All the major firms that threw virgin first year sacrifices into The Maw 3 years ago, are likely still throwing people into the Maw today.

The only way to satisfy the hunger of The Maw is to get ahead it.  This happens by reducing the cost per lawyer per unit work. The only way to do this is to lower the cost of the work billed to client. The only way to do that is to lower the price the firm pays to its members to do the work.  This doesn't always mean lower compensation for everyone. However, the fixed income that law firms provide to their professional class is not flexible.  Therefore, to be truly Maw resistant, compensation needs to be variable, for everyone. Associates should be able to ask for, and receive, a massive pay cut, instead of having the firm select between keeping one group of associates at full salary, and terminating another.