Silicon Valley Bank Fails

Silicon Valley Bank in California has taken a turn for the worst.  Not good.  The Federal Deposit Insurance Company [FDIC] is taking over the bank.  The FDIC press release states:

WASHINGTON – Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

Customers with accounts in excess of $250,000 should contact the FDIC toll–free at 1-866-799-0959.

The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.

Silicon Valley Bank is the first FDIC–insured institution to fail this year. The last FDIC–insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020.

LES of Silicon Valley FREE Webinar on Corporate Finance and IP Management

One of the “positives” of Covid-19 is that many organizations are offering fantastic content online and even for free.  Here’s another great opportunity with an excellent organization and chapter of the Licensing Executives Society (LES).  The Silicon Valley Chapter of the LES and the Financial Executives International are offering a FREE webinar titled, “Intellectual Capital.  Connecting the Financial and IP Communities,” on Thursday, September 24, 2020 from 12:00 pm to 1:30 pm (Pacific Standard Time).  The registration link is below.  Here are the details from their email notice:

REGISTER Registration Fee is complimentary. A webinar link will be sent after your registration. The Silicon Valley Chapters of the Financial Executives International and the Licensing Executives Society USA/Canada invite you to participate in a groundbreaking interactive webinar on the integration of Corporate Finance and IP Management. PROGRAM: A panel of seasoned professionals will discuss a number of Intellectual Capital (IC) intersection areas including: Identifying the relevant categories of IC for a particular company Getting board-level and C-Suite support for establishing a corporate IC strategy Developing IC management business processes, such as:   o    IC Valuation o    IC Accounting o    IC Financial Reporting o    IC Transactional Issues o    IC Tax Considerations PANEL: Mary Adams, Founder, Smarter Companies Bill Elkington, Founder, Mind IC Petra Loer, Managing Director, Valuation Services, Andersen Moderator: Ron Laurie, Executive Chairman and CIPO, InventionShare PANEL BIOS: Mary Adams, Founder, Smarter Companies Mary is a consultant, speaker and practitioner of intangible capitalism which focuses on the long-term pursuit of both profits and prosperity.  Her current work is focused in three communities that she helped create:  The Exit Planning Exchange that brings long-term thinking to the private company market.  The Integrated Reporting U.S. Community that brings long-term thinking to public companies. And Smarter-Companies, a specialty consulting community that provides methodologies and tools to support intangible capitalism. Mary is the co-author of Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. Prior to starting her consulting firm in 1999, she spent 14 years as a high-risk lender in the U.S. and Latin America at Citicorp and Sanwa Business Credit. Bill Elkington, Founder, Mind IC Bill’s career in three Fortune 500 companies, a startup, and now in his consulting firm—Mind IC LLC—has been in the field of intellectual capital management. His focus has been on uncovering, creating, protecting, and extracting the value of companies’ intellectual capital assets. His expertise is in various areas of intellectual capital management: business cadre leadership, rights valuation, rights strategy, public policy, enterprise policy and process, transactions, patent protection, and change management and communication across the enterprise. Ron Laurie, Chair, LES Silicon Valley Chapter Ron has worked in Silicon Valley since before it had that name, initially as a systems engineer and then as an IP lawyer and patent strategist.  He was a founding partner of the Silicon Valley offices of Irell & Manella, Weil Gotshal and Skadden Arps and has taught IP strategy courses at Stanford and Berkeley law schools.  Ron is Executive Chairman and CIPO at InventionShare, a new kind of early-stage fund that transforms breakthrough inventions into broadly patented platform technologies which can be productized by global companies across a broad range of applications and markets.  He sits on four other boards, including the oldest and most successful publicly-traded patent licensing company. Petra Loer, Managing Director, Valuation Services, Andersen Petra is a member of the Valuation Services Group at Andersen, a global tax and financial advisory firm. Her experience includes the valuation of closely-held businesses, business interests, intangible assets, intellectual property, debt instruments, and derivatives. These engagements span a variety of purposes, including financial reporting, tax planning and reporting, mergers and acquisitions, litigation support, strategic planning, and restructuring. Petra’s client basis ranges from small closely held businesses to multi-billion-dollar multinational public companies, in industries as diverse as manufacturing to technology.

The Median Salaries of Bay Area Technology Companies

Have you ever wondered what are the median salaries at Silicon Valley/Bay Area technology companies?  It must be very high given the astronomical cost of living there, right?  The Silicon Valley Business Journal has collected the median salaries of the following companies:

Advanced Micro Devices, Inc.; Apple Inc. Arista Networks, Inc.; Autodesk, Inc.; BioMarin Pharmaceutical Inc.; Bio-Rad Laboratories, Inc.; Cadence Design Systems, Inc.; Cisco Systems, Inc.; Citrix Systems, Inc.; Dell Technologies; Dolby Laboratories Inc.; eBay Inc.; Equinix, Inc.; Electronic Arts Inc.; Facebook, Inc.; FireEye, Inc.; Fortinet, Inc.; GoPro, Inc.; Guidewire Software, Inc.; Illumina, Inc.; Intel Corporation; Intuit Inc.; Intuitive Surgical, Inc.; Marvell Technology Group Ltd.; Micron Technology, Inc.; Microsoft Corporation; Nektar Therapeutics; NetApp, Inc.; Netgear, Inc.; Nvidia Corporation; Oracle Corporation; Palo Alto Networks, Inc.; PayPal Holdings, Inc.; Raytheon Co.; Salesforce.com; ServiceNow, Inc.; Square, Inc.; Splunk, Inc; Symantec Corporation; Tesla Inc.; Twitter, Inc.; Varian Medical Systems, Inc.; Veeva Systems Inc.; Visa, Inc.; VMware, Inc.; Xilinx, Inc.; Yelp Inc.; Zynga Inc.

Here is a link.  Enjoy! 

The U.S. Industrial (Technology) Military Complex is Alive and Well: Microsoft and the Defense Innovation Unit

The LA Times recently published an article titled, “Microsoft will Give the U.S. Military Access to ‘All the Technology We Create'.”  The article discusses Microsoft’s recent announcement as well as the tension in some U.S. technology companies concerning working with the U.S. military.  For example, some Google employees have expressed displeasure with Google’s decision to work with the U.S. military.  The article notes that:

The Defense Department has established the Defense Innovation Unit, which is intended to provide capital — without taking an ownership stake — to companies that want to work on prototype projects that help address problems faced by the U.S. military.

The Defense Innovation Unit’s website is here.  The Defense Innovation Unit focuses on five areas: artificial intelligence, autonomous systems, human systems, information technology and space.  Their team includes: “about 75 military and civilian personnel. Prior to joining DIU, we’ve launched and sold companies backed by tier-1 VCs; led teams at the Joint Staff, the Office of the Secretary of Defense, and the White House; served with our military around the world; and helped build some of Silicon Valley's most iconic companies.”  Notably, the program is built around speed—a contractor will know if they have a “pilot” agreement within 30 days with a quick follow-through for a more involved contract.  The 2017 Annual Report states the mission of the Defense Innovation Unit:

The U.S. Department of Defense (DoD) established Defense Innovation Unit Experimental (DIUx) to accelerate commercial innovation to the warfighter in order to meet the changing demands of today’s strategic and technological environments. The Department’s 2018 National Defense Strategy (NDS) boldly acknowledges that our nation’s military-technical advantage is eroding as our competitors and adversaries have the same access to the global technology marketplace driving innovation. Without significant changes to DoD’s acquisition culture and processes, the U.S. military will continue to lose its long-held technological superiority.

Military-technical competition is dramatically different from past decades when key technologies were developed in government labs, often exclusively for military use. A technology first-mover up until the end of the Cold War, DoD must now adopt a fast follower posture to keep pace with commercial refresh cycles. The commercial sector leads the way in many cutting-edge areas from artificial intelligence to autonomous systems to space, the convergence of which generates the prospect of dramatic changes to the character of warfare. The implications of global access to advanced commercial technology are visible in today’s conflicts and the loss of exclusivity means the likelihood of technological surprise is far higher.

It is DIUx’s mission to lead DoD’s break with past paradigms of military-technical advantage to become fast adapters -- as opposed to sole developers -- of technology, integrating the advanced commercial capabilities necessary for strategic advantage. In this hyper-competitive environment, DoD needs to prioritize speed of delivery, rapid and modular upgrades, and quick operational adaptation on the battlefield. Success in this new era of military-technical competition no longer goes to those who seek the most exquisite systems, but rather to those who move fast and think creatively.

Headquartered in Mountain View, CA, with offices in Central Texas (Austin); Boston, MA; and in the Pentagon. . . . 

On intellectual property, the Frequently Asked Questions page states:

How is intellectual property treated and protected?

Prior to the start of a project, it is important that a company identify rights in pre-existing data. In general, companies retain ownership of IP assets created during the effort. DoD is usually licensed certain rights to use these assets in accordance with the agreed OT (i.e., pilot contract) terms and conditions. These rights control, inter alia, how DoD can use, disclose, or reproduce company-owned proprietary information.

What are the different ways IP is licensed under an OT agreement (i.e., pilot contract)?

Unlimited Rights. These give DoD the ability to use, disclose, reproduce, prepare derivative works, distribute copies, and perform publicly, in any manner and for any purpose, and to have or permit others to do so (absent any separate security classification or export control restriction). We usually don't need this and do not anticipate awarding any OT agreements (i.e., pilot contracts) with unlimited rights.

Government Purpose Rights. These give DoD the ability to use, modify, reproduce, release, perform, display, or disclose data only within the Government (including competitive re-procurement). However, DoD cannot release the data for any commercial purpose.

Limited Rights. DoD may use the company’s data, other than computer software, within DoD but not release the data outside of DoD except in limited circumstances. DoD may not use the data for manufacturing additional quantities of the item. Data may not be released without company permission/associated nondisclosure agreement.

Restricted Rights. These apply to noncommercial computer software only. DoD may only run the software on one computer at a time, and may make only the minimum copies needed for backup. The software may not be released outside of DoD except with company permission/associated nondisclosure agreement.

Tickbox TV: Concerns for Content Owners, Cable, and Silicon Valley

Tickbox TV provides a set top box, which allows users to access content on the internet.  Apparently, the device can be used to access and display copyrighted content, such as movies and television shows, through the use of Kodi (an open source media player) and add ons. Many content owners, represented by Munger Tolles & Olson, have filed a complaint for inducement and contributory infringement.  The case is somewhat similar to the classic Sony, Napster and Grokster type cases.  Joe Mullin of Arstechnica provides a very nice description of the case, here.  The Los Angeles Times recently reported on the ownership of Tickbox TV in an article titled, “How an Atlanta Power Couple’s Business Has Heightened Silicon Valley’s Piracy Anxieties.” 

I can understand the anxiety of content providers and some Silicon Valley companies.  As the Los Angeles Times article points out, Tickbox TV (with the software) is dangerous to some content owners (including those in Silicon Valley) because it operates similar to devices that some users may be more comfortable using—so, think of your technology adverse grandparents.  It is like plugging in a VCR.  This may also be a group of consumers who are paying “full price” for content and do not ordinarily illegally access material.  This should make cable and satellite services companies very concerned.  From the perspective of some in Silicon Valley, the case may lead to increased lobbying from content owners concerning stronger copyright protection depending on how the case turns out.  It appears that Tickbox TV is now receiving some counsel and is attempting to insulate itself from liability through the use of disclaimers. 

We are celebrating Thanksgiving in the United States today.  Happy Thanksgiving! 

How to Create an Excellent Innovation Outpost

Start-up guru and Lean Launchpad developer Steve Blank has published a fascinating set of four blog posts on Innovation Outposts with co-author Evangelos Simoudis, venture capitalist.  In the first post, the authors discuss a history of corporations and their response to technological change.  The post notes how corporations became very good at development and have spent less time on research.  Essentially, corporations were unable to keep up with innovation occurring outside their specific development field.  In part, this was because of the number of scientists and entrepreneurs moving to start-ups because of the opportunity to do cutting edge work—and this was helped along by the availability of venture capital.  Because of this dynamic, corporations have needed to monitor (“sense”) and “respond” to the development of new technologies that may impact their existing lines of business, particularly in an “innovation cluster,” such as Silicon Valley and Boston.  The second post describes innovation outposts.  It provides several examples of innovation outposts and discusses the functions of those outposts: primarily to “sense” or monitor new technologies and second, to “respond,” such as by acquiring technology or partnering with companies with attractive technology.  The authors note that there is a danger that most innovation outposts will become innovation theater—essentially very good at sensing, but not at responding. 

To address the danger, the authors, in the third post, provide six questions that should be considered at the C-Level.  And, the authors emphasize that those questions must be considered at that senior management level and not at the corporate R&D level.  The questions provide focus for the corporation and its goals for the innovation cluster.  Finally, the last post provides the nuts and bolts for how to develop an innovation outpost, including having the right staffing and “corporate buy-in for productization.”  The authors plan to write a book based on the subject of the posts.  It would be interesting to see a complimentary discussion of the role of intellectual property and the intellectual property lawyer.  We eagerly await publication of their book!

New York's Silicon Alley: the once and future (?) IPO wasteland

With all of the talk about Silicon Alley, the name given for high tech

activity in New York, the fact remains that successful technology IPOs emanating from New York have been few and far between. How few and far between was brought home last week in a report that Etsy (located in what is called the Dumbo neighbourhood of Brooklyn) is preparing for an IPO some time as early as Q1 2015. The company is reportedly seeking to raise up to $300 million. The last time that a tech company from the New York area raised such an amount was during the dot-com bubble of nearly 15 years ago.

Etsy offers a website that enables people to sell both handmade crafts and vintage goods (think of a 1957 turquoise Royal Quiet De Luxe typewriter). As such, the company can be said to engage in the craft niche of the e-commerce space, where 800-pound gorillas in the form of Amazon.com and Alibaba enjoy a pre-eminent position. Approximately 26 million items are listed for sale on the Etsy site. Its revenues derive from a 20-cent charge for sellers to list products and it takes a 3.5% cut from each item sold. It also earns sums from advertising and payment processing. The report states in 2013 the company posted $1.35 billion in gross merchandise sales, and it is presumed that this figure was greater for 2014.

There is something quite extraordinary in the fact that New York seems to be a wasteland for generating tech companies with significant IPO potential. One only has to compare this (lack of a) track record with the oversize IPO success of Israel, which continues to create hi tech companies that attract public funding. The question is—why? A piece by Jeremy Quittner, “A Tale of Two Cities: Why Silicon Alley Isn’t the Next Silicon Valley (Yet)”, which appeared last year on Inc.com, offered some thoughts.

1. “NYC is a strong market for advertising technology, financial technology, some commerce, and a few other smaller segments, but it's not aligned with where most venture dollars are going these days," quoting Dave Zilberman, a partner at Comcast Ventures who moved about from New York to Silicon Valley.

2. Zilberman pointed to software as a service, cloud computing, network and computer security and enterprise computing a start-up areas attracting big money. It seems that New York is not strong in any of them. Recall that Etsy Crafts itself is a niche e-commerce site.

3. Culture was also mentioned. Again, quoting Zilberman, “Silicon Valley has a stronger culture of risk-taking than New York City. It's simply a function of people with the right skill set and risk tolerance to work for a startup."

4. Drilling down further, it appears that the bulk of job growth in New York has been in designing, managing, and operating computer systems. Notable in this regard is digital media and software publishing. What is missing, however, is what is described as areas “heavy on engineering and new product development--jobs more likely to lead to innovation and starting ups.”

5. As observed by says Ross Fubini, partner at Canaan Partners in Menlo Park, California, "Innovation and creating great companies is all about the people--and Silicon Valley is special in that regard, because of the number of entrepreneurs, investors, engineers, and the culture that come together in a uniquely effective and creative way."

In light of Quittner’s piece, the obligatory question is—can New York ever change the situation? Most certainly the issue continues to be raised and many in New York wrestle with the problem. All those engineering graduates from Berkeley and Stanford certainly give Silicon Valley a leg-up, but New York is still a magnet for creative and ambitious types. Nevertheless, whether that is enough to ever create an environment ripe for successful establishing tech companies with notable IPO potential remains an open question.