After the Gold Rush – settling in the US
Like naive prospectors who stampeded north in the Klondike Gold Rush, many Cambridge companies head to the US blinded by glitter to the realities of the mission.
Just three tiny letters separate adventure from misadventure and the cold, harsh facts for the Yukon ‘stampeders’ was that the vast majority never so much as sniffed gold – and with 40,000 prospectors cramming into the fields they almost caused a famine. It was a classic example of the risk outweighing the opportunity. So how can today’s adventurer entrepreneurs avoid the pitfalls?Tony Quested spoke to Graeme Menzies, of Mills & Reeve in Cambridge, and Bill Sellay of Mills & Reeve’s US partner firm, Robinson Cole, about the do’s and don’ts of transatlantic trade.
Local companies targeting the US market would do well to remember the view of Canadian scholar and philosopher, Marshall McLuhan, that: “Most of our assumptions have outlived their uselessness.”
We assume that because we speak the same language – well almost – gaining business traction in America depends on the same approach we’d take at home. Wrong!
Companies need to research the US market as carefully as they would China or India. And they need to invest time and energy in immersing themselves into the territory in which they base any US operations.
Graeme Menzies and Bill Sellay presented a powerful argument to Cambridge companies to rip up their assumptions when dealing with America when they addressed the inaugural Transatlantic Business Forum organised by Deyton Bell recently.
And they picked up the debate with Business Weekly this week in the light of record Transatlantic trade between Cambridge and the US in recent months.
Just as a rose comes with thorns, so opportunity carries inevitable risk. One of the most fervent arguments the duo put forward to ensure success for UK companies in America is to get the patent strategy battened down and ensure the portfolio is defensible.
Getting insurance for a suite of patents in the US is not easy and there are patent pirates waiting to raid your coffers. They call them patent trolls in the States – the equivalent of ambulance chasers in Britain – well organised, entrepreneurial predators who look for any chink in your patent armour and then go for the financial kill by orchestrating infringement claims that few have the appetite or coffers to defend, regardless of their legitimacy.
Menzies said: “The patent trolls are real pirates and have become part of US culture in the last 10 years. The cost of patent claims in the US is horrendous. We were involved in one piece of patent litigation in California that involved three-quarters of a million in costs. Costs of $400-500 are not unusual.
“The patent trolls trawl through companies’ IP and insist they have prior claim; it’s known as prior art.”
Prior art in most systems of patent law constitutes all information that has been made available to the public in any form before a given date that might be relevant to a patent’s claims of originality. If an invention has been described in prior art, a patent on that invention is not valid.
Most companies attacked in this way choose to settle rather than go through more costly litigation, according to Menzies.
Bill Sellay says UK companies settling in the US tend to get their patent strategies more or less right but registering Trade Marks is another thing entirely.
He said: “At least 80 per cent of companies I work with in this field haven’t registered their Trade Marks. UK companies come here, start out and they roll out the website, the corporate literature and so on.
“Then they get a very serious looking letter saying: ‘Hey! That’s our Mark. Stop using it.’ And for the next six months they are spending valuable time, resource and money addressing the branding problem – resource they should have been devoting to winning business.
“Another problem area in IP protection is getting companies to ensure they protect their trade secrets through confidentiality agreements with their employees. Employees change jobs and it’s sensible to invoke confidentiality agreements and remind them in writing before they leave that these are in place and enforceable – rather than have them hand your IP to a rival. In the US these agreements are enforceable and pretty effective.”
Defending Intellectual Property Rights is far from straightforward. Sellay says that defensibility is a serious problem. Insurance tends to be expensive – if available!
“You really need to get patent counsel onboard from the beginning because your ability to raise funding will depend on the strength of your patent strategy. VCs aren’t known for funding vulnerable companies.”
Sellay advises UK companies targeting the US to “get boots on the ground.” He said: “They have to get over here and really spend some time talking to people who can help them get their feet under the table. All the companies I know that have had the greatest success here have spent time talking to potential customers, distributors, professionals, other UK companies who have made it big in the States – even competitors – to get a sense of what culture is required to succeed in business in the US. What have their experiences been?
“And it is just as much about culture as business needs. If you follow this model you settle faster, better and cheaper. You find the right trading environment, the right employees and you get to know who’s in the pool that you should be talking to and learning from.
“If you want to make the best entry here rather than a series of false starts then you can’t just spend a couple of days laying the groundwork. It will pay huge dividends and save a whole lot of struggle if you invest the time in the first place.”
Mills & Reeve and Robinson Cole have worked hand in glove for around 20 years – from the time Menzies and Sellay got to know each other.
Menzies says: “I can put a client in Bill’s hands and know they will be looked after. La Playa, the Cambridge based specialist insurer which has expanded into the US, is a good case in point. Bill has spent time in Cambridge with the La Playa management team and knew exactly what was required to give the company a soft landing in America.
“We collaborate on IP issues, Mergers & Acquisitions, Joint Ventures, visa applications, employment and licensing issues – a whole host of things. And it is very much a two-way process.”
The sentiment is reciprocal. Sellay said: “Many firms view their membership in a network as nothing more than an entitlement to a directory of names and phone numbers – often they know little or nothing more about the firms listed in the directory.
“We have built our international relationships based on the premise, with which Graeme very much agrees, that we will commit to meeting regularly, being completely forthright as to our respective capabilities and concerns, and treating each other (and each others’ clients) with the same respect, responsiveness, and courtesies as we would members or clients of our own firm.
“Not surprisingly, clients recognise and genuinely benefit from the difference between a mere ‘network’ firm and a firm with whom we have a genuine relationship like Mills & Reeve. We have a real chemistry and great communication.”