From the Runway to One Click Away: How Fast Fashion Startups are Making Trends Accessible to the Average Consumer

By: Sammy Zand

March 2017

“Fast Fashion” is a contemporary term used by fashion retailers to describe designs that move from the catwalk right to the stores and in the hand of consumers. Fast fashion clothing captures current fashion trends, as the collections are based on the most recent ones presented at Fashion Week in the spring and fall of every year from New York to Paris. Its emphasis is on optimizing certain aspects of the supply chain for these trends to be designed and manufactured quickly and inexpensively. This allows the mainstream consumer to buy “current” or “trendy” clothing styles but at a significantly lower price.

This has developed a product-driven concept based on a manufacturing model referred to as “quick response” developed in the U.S. in the 1980s. Fast Fashion has become a force in the retailing industry and it is seen in increasing ubiquity with Fast Fashion powerhouses like Zara, H&M, Topshop, and Forever21 leading the market revolution and becoming household names.  

Marketing is key to the success of the Fast Fashion model. It creates the desire for consumption of new designs as close as possible to the point of creation. The continuous release of new products has become a highly cost effective marketing tool that drives consumers and increases brand awareness. Americans are now purchasing five times the amount of clothing that they were in the 1980s.

Most of the fast fashion brands have now gotten so big that their selection becomes overwhelming to the customer. The store is too big, there are too many options, colors, and styles, and its difficult for the average shopper to come up with an outfit. While many companies like Topshop and H&M dominate High Streets all across the globe, their first focus is in the brick-and-mortar realm. The web is an afterthought. While many of these large fast fashion companies have online stores, it still reflects the in-store experience, overwhelming the shopper. E-commerce is now filling in the gap with personalization.

A LA-based startup called DailyLook sets its sights on being a go-to fast fashion brand completely on the web. Shoppers can create a profile where they receive personalized suggestions that tailor to their size, preference, and needs. This startup has brought the styling experience and head-to-toe designed outfits, straight to the shopper’s door. While many of the fast fashion stores have online shopping available, this startup brings back a key aspect: personalized shopping.

To do that, the CEO and Founder Brian Ree, raised $2.5 million in a seed round from a number of investors, including GRP Partners, RRE, SV Angel, Novel TMT Ventures, Matt Coffin, Thomas Mclnerney, and Rachel Zoe. It carries items from other brands but it also produces its own label. DailyLook has been around since it launched back in 2011 and it has quietly been building a large audience since then.

Another online fast fashion startup that has grown in recent years is Stitch Fix. Stitch Fix launched seven years ago, and became a highly valuable and rapidly growing business proposition. FORBES estimates that Stitch Fix brought in $250 million of revenue in 2015 and was expected to jump by 50% in the next year or two. To accommodate this scale, the company has substantially increased its head count and now has 2,800 mostly part-time stylists and more than 1,000 warehouse workers across five locations. As a private company, its finances are held close to the vest. But VC Experts valued the company at around $300 million while another investor marked that up to $730 million. The company has even survived several scandals. Stitch Fix was actually found nearly tripling the prices from what is found in-stores. Nevertheless, shoppers continue to love the personalized attention they can have from the comfort of their own home.

This hits on a major key component to the success of most startups: consumer demand. More and more, consumers want products or services that are trendy, affordable, and readily accessible. DailyLook and Stitch Fix target young professional women that can get the experience of having their own wardrobe stylist but without the hassle of in-store appointments.  

Prominent startups in a number of industries have capitalized on the potential of this on-demand, user-tailored model. This is further reflected in other successful startups over a number of industries. Birchbox is another personalized online subscription but for beauty and body products. Birchbox launched in September 2010 and was founded by two young entrepreneurs and Harvard Business School graduates, Hayley Barna and Katia Beauchamp. New York-based Birchbox boasts more than one million subscribers who spend $10 per month for a box of personalized beauty samples, tending to the subscriber’s online created profile. The subscriber adds information about their daily routine, hairstyle, and skin type or problems. Birchbox then sends samples that reflect each subscriber’s individual need and hair or skin type. The company is now banking $60M. Other industries include delivery services like BlueApron or Sun Basket where customers can pick meals every week and the ingredients are delivered right to their door.

There are many reasons to see a successful startup, but what DailyLook and Stitch Fix have proven is that convenient and affordable services are becoming higher in demand. Those that have thrived have done so with a unique value proposition that can’t be matched by brick-and-mortar retailers. These startups have essentially succeeded because their competition is “non-consumption.” They are taking on the consumers that aren’t even considering going into the stores as part of their leisurely day and making them into people who browse and shop online. E-commerce is still growing and most entrepreneurs would be wise to use remember the platform.

The Global Struggle: Can I Uber to My Airbnb in Seoul?

By Ji-Su Park

February 2017

We say that today we live in the era of “McDonaldization” or the worldwide homogenization of cultures. In today’s globalized society, everything is supposedly efficient, calculable, predictable and controllable everywhere. To some extent, everything seems to be in the process of global gentrification, with McDonalds and Starbucks in every city around the world.

But we still often run into situations that force us to question such sociological assumption. Think about some of today’s most successful startups from the United States. In today’s gig economy, or a society in which people take short-term jobs or single projects for which they are hired to work on demand, many startups like Uber, an online transportation network company that develops and operates a mobile application that allows consumers to request car transportation, and the so-called “Uber for X” companies provide services that are available at the touch of a smartphone button.

Suppose you leave the U.S. to travel overseas, your plane arrives at a foreign airport, you pick up your suitcase and you are finally ready to exit the airport. Now, do you call an Uber cab? Is Uber available there? Or can you use Google Maps to check how to get to your Airbnb apartment from the airport? Oops, no routes found; the app is not working anymore.

Many startups that successfully became the “big things” in the U.S. naturally strive to expand their business globally. However, numerous governments seek to ban or limit the companies from doing business in their jurisdictions. For example, you will definitely encounter the situation described above at Incheon International Airport in South Korea. Korea, a country still at war today and still divided into South and North, presents a unique legal challenge to on-demand companies like Uber. In order to understand Korea’s Uber ban, we must first look at Google. The South Korean government is not so friendly to Google: The South Korean government has decided to restrict Google Maps services because of national security issues. The law at issue is the Korean law that blocks companies from exporting the government-supplied map data for national security issues, which Google argues that it must do in order to offer features such as driving directions, public transit and transportation information, and satellite maps.

Google has been requesting a license from the Ministry of Land, Infrastructure and Transport since 2008 but had no luck. “The main point is national security,” said Kim Tong-il, an official at South Korea’s Ministry of Land, Infrastructure and Transport, which oversees mapping policy. The Seoul government, also citing national security, blocked Google’s efforts to export map data to data centers outside of South Korea. As a result, a Google Maps search for a driving route between Seoul, South Korea’s capital, and Busan, South Korea’s second biggest city, returns an error message: “No routes found.” In January 2017, Google added a new feature to Google Maps that allows users to call an Uber without ever leaving Google Maps. The Google Maps app will prompt users for their Uber account information, which will provide Google Maps with any linked information including payment methods. Unfortunately, this new convenient feature is extremely unlikely to be available in Korea.

In addition to the Google Maps problem, since its entry to Korea in 2014, Uber faced harsh protests from Korea’s strong taxi union and the locals who refused to accept the American startup’s “my-way-or-the-highway” approach in ignoring local law and regulations. Although Uber has faced similar criticisms in various states in the U.S. for its aggressive bypassing of the local licensing laws, safety laws and/or employment laws amounting to unfair competition, Uber seems to face even harsher criticisms overseas when a deeper cultural misunderstanding comes into play. Jungwook Lim, head of Startup Alliance in Seoul, noted that there were suspected cultural clashes between the local taxi industry and Uber Korea, which was initially run by Korean Americans who were not familiar with the local business culture. Moreover, criticizing Uber for violating the Passenger Transport Business Act yet denying responsibility in the event of an accident, Seoul Mayor Park Won-soon joined North American and European peers in enforcing standardized regulations over sharing economy platforms.

But not all sharing-economy startups from America have failed in South Korea. Consider Airbnb, an online marketplace and hospitality service that enables people to list or rent short-term lodging around the world. Uber and Airbnb are remarkably similar in many ways: Both companies were born in San Francisco, CA, and they are Silicon Valley’s biggest success stories in the on-demand economy. But while Uber has been showing an aggressive catch-me-if-you-can attitude that has put it at odds with regulators in many of the foreign cities that are crucial to Uber’s global ambitions and goals, Airbnb took a much friendlier approach. Airbnb has tilted towards working with local politicians in Korea and also has been hiring and working with ex-mayors of Seoul.

Even though Airbnb has still faced some expensive fines in several cities due to local policies, by and large, Airbnb’s approach has been to work with regulators, not against them. In Seoul, Airbnb is complying with the Korean law and also is beginning to clamp down on illegal listings in the country. In fact, in October 2016, Airbnb vowed to wipe out the illegal listings and delete hosts who have not reported to the central and local governments in Korea. This could have a huge impact on Airbnb’s supply since almost 70% of listings are not registered with the government. In other words, if Airbnb does go through with this plan to work with the government to wipe out illegal listings, it could wipe out much of the transaction it has made in what the country manager Patrick Lee said is among Airbnb’s fastest-growing markets in Asia.

Lee, however, gladly accepts the fact that it would take time for the government to understand that Airbnb is not a threat to Korean society or the Korean tourism industry. Lee says that Airbnb recognizes the difficulties of making business strategies in the gray area of the sharing economy: “Our team has a belief that if our decision is not contributing value to the society or industry, then that was the wrong decision if that business is in the gray area. So we are making decisions based on that belief.” Luckily for Airbnb, the Korean government ran a pilot program in three tourist-heavy areas in Korea that lets people rent out rooms through a special law.

As seen in the struggles of American startups like Uber and Airbnb in Korea, going global is not easy. Uber’s struggle shows that even though a startup’s initial success may lie in innovative ideas such as elimination of transaction costs (e.g. cab search costs), its long-term goals (e.g. global expansion) may ultimately depend on its attitude. What approach a company takes during its global expansion process can potentially make a difference in its brand image and public trust, which ultimately can contribute to its success. To become a global giant, should the company seek to go its way and then ask for forgiveness later? Or should the company ask for a permission, a collaboration and a partnership beforehand?

“Any government can shut you down, so you have to be willing to play the regulatory game,” said Gerald R. Faulhaber, professor emeritus of business economics and public policy at the Wharton School at the University of Pennsylvania, to the New York Times. “You need to work with regulators. There’s no way around that.”

What does Trademarking give me as an Entrepreneur?

By Kathryn Pajak

February 2017

My client, an Entrepreneur, had an idea, a plan, a product, and wanted to protect it.  He asked:  what kind of protection does the law provide and how do I get it? Are all others enjoined from using my idea? What happens if someone is using something similar to my mark but not quite it – where is the line? 

What is an Entrepreneur?

“Entrepreneur” may be the motto of the millennial generation but it is not-so-new.  It has been used in English since at least the middle of the 18th century.  Merriam Webster defines entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.”  Entrepreneurs are not merely small business owners, for not only do entrepreneurs own their business, but also they share a spirit:  the belief that their idea is worth the risk, a knowledge of a niche market, the challenge of making big things happen with few resources, and an understanding of what consumers want.  In our current age of technology, innovation, and startups – no matter how disparate the idea, service, or product – common obstacles and goals tie entrepreneurs together. 

Whether they have a product or a service, all entrepreneurs have in common the desire to protect what is theirs.  In the law, this protection arises out of the protection of intellectual property.

So, what is intellectual property?

Intellectual property (“IP”) is a broad category that describes patents, trade secrets, copyrights, and trademarks.  The idea of IP derives from the sense that certain products of human capital should be protected similarly to physical property.

What does a Trademark get me?

Trademarks protect finished goods that are related to the brand.  The overarching theory is to protect consumers because trademarks help consumers identify the source of goods or services.  Trademarks include any word, name, symbol, device, or any combination used by someone who intends to use it in commerce to identify and distinguish his or her goods as an indication of the source of the goods. Lanham Act §45 (15 U.S.C. §1125).  That was legalese… in English trademarks are whatever distinguishes a product and its source. 

Cooley LLP described it well: 

            “As a practical matter, trademark rights function both as a sword and a shield:

Sword: Trademark rights enable you, the brand owner, to stop others who are using the same or similar names to cause consumer confusion, usurp or free ride on your goodwill and reputation, or harm you by potentially associating your brand with an inferior product.

Shield: Trademark rights protect you from others who might try to challenge your right to use or register your brands.”

Is my name trademarkable?

Some terms are not trademarkable such as generic words and symbols.  Descriptive marks, describing some character or quality of the mark, are only protectable if the mark has achieved secondary meaning, i.e. when consumers associate the mark with a single source.  The best type of trademark is a suggestive or arbitrary mark because they receive automatic protections.  “Suggestive” suggests but does not describe some characteristics whereas arbitrary terms are fanciful they bear no relation to the product.

How do I obtain a trademark?

When you trademark, you receive the rights to protect against consumer confusion.  What does that mean?  You can prevent others from using your trademark.  You also get the right against dilution.

In order to receive a trademark, your mark must be distinctive and used in commerce.  Registration is not required but confers significant benefits.  When you register your mark federally you receive the presumption of exclusive rights to use your mark.  Registration of a mark also establishes nationwide priority over other marks, can stop free-riders or other third parties from using your mark, and gives you automatic access to federal courts which might enhance your remedies if someone infringes on your mark.

In order register your mark and gain these extra securities, the mark must pass clearance, which involves checking to see if someone else has already registered it.  Next, your attorney would prepare and file an application.  Trademarks cost between $200 and $400 but the protection it affords are worth the fee.

What if I do not register my mark federally?  Am I still protected?

You do not need to register your mark federally to get common law protection.  In fact, you can get automatic protection in your state.  Without registering, you can still use TM or SM superscript in your advertising material or your website.  However, I would recommend to any of my clients interested in trademarking that they register because the extent of the protection is superior..  For instance, a state trademark only protects you in that geographic area, whereas federal trademarks give you protection across the United States. 

How long am I protected?

When you successfully trademark, you receive protection for as long as you use your trademark.  In fact, there is potentially limitless duration!

Are there other ways to protect my idea?

This article focused on what trademark protection provides but entrepreneurs can also protect their intellectual property through patents, trade secrets, or copyrights.

IP protection derives from a variety of sources depending on the type of IP.  Copyright protection derives from the Constitution directly.  The Copyright Clause of the US Constitution provides protection “to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  U.S. Const. Art. I, § 8, cl. 8.  You can copyright original works of authorship like books, movies, music, and even software.  Trade secret protection, on the other hand, is largely derived from state law.  Trade secrets are any valuable information you actively keep secret like formulas, techniques, etc.  Patents derive protection from federal law and are registered with the US Patent and Trademark Office PTO.  Patents provide the greatest amount of protection and the greatest amount of work to secure.  You can patent innovations, processes, and methods.

The main driver in the United States for protecting intellectual property is to promote innovation, thus when protection would limit innovation, you are not likely to get protection. 

You should speak to a lawyer about the best way to protect your intellectual property.

Resources:

https://www.merriam-webster.com/dictionary/entrepreneur

http://www.forbes.com/sites/groupthink/2013/10/04/what-a-millennial-entrepreneur-can-teach-you-about-business/#57c28d1377e8

http://www.investopedia.com/terms/i/intellectualproperty.asp

https://www.uspto.gov/

https://www.orrick.com/Total%20Access/Blog/2016/09/09-06-2016-Trademark

https://www.cooleygo.com/neglecting-trademark-protection/

https://www.uspto.gov/trademark/view-fee-schedule-trademark-fee-information

https://cyber.harvard.edu/metaschool/fisher/domain/tm.htm

http://www.stantonlawfirmllc.com/2014/10/whats-in-a-name-avoiding-trademark-issues-in-naming/

Mark Lemley, et al., Intellectual Property in the New Technological Age: 2016, Vol. I: Perspectives, Trade Secrets and Patents (Clause 8 Publishing 2016)

Mark Lemley, et al., Intellectual Property in the New Technological Age: 2016, Vol. II: Copyrights, Trademarks and State IP Protections (Clause 8 Publishing 2016)

Lanham Act §45 (15 U.S.C. §1125)

U.S. Const. Art. I, § 8, cl. 8. 

At What Point will a Unicorn’s Horn Pop the Tech Bubble?

By Joseph P. Glackin

February 2017

Young startups with little to no assets are raising multi-million rounds of financing with goals of becoming the next “unicorn.” A “unicorn,” in the business realm, is a startup company that has been able to achieve a stock market valuation or estimated valuation of over $1 Billion, despite having little or no established performance records.[i] Globally, there are currently over 200 companies that have been able to claim this mystical tag.

Many start-ups who have surpassed the $1 Billion “unicorn” benchmark have been able to obtain the rank of “mega-unicorn” by achieving valuations of over $10 Billion. Some of these “mega-unicorns” include the well-known Airbnb (with a valuation of over $30 Billion), Uber (being valued at over $60 Billion),[ii] and Snapchat (with a valuation of $25 Billion despite its cost of revenue for both 2015 and 2016 being more than its actual revenue coming in).[iii]

With the NASDAQ and S&P at all-time highs, the market continues to have a bullish outlook. This sentiment fuels a positive investment environment, continually pushing the valuations of private tech companies and corresponding investments to new levels.[iv] This means that when the market is high, valuations will often be high as well. However, more often than not, these valuations are artificial at best.

Venture capital funds with billions to invest are pumping what seems to be unlimited funds into this unprecedented investment climate, creating a breeding ground for the aforementioned “unicorns.” In the past, venture capital funds were considered big if they held over $500 million, but times have changed significantly. Exemplifying this fact, venture capital funds raised over $12 Billion in the first quarter of 2016, reaching a 10-year high in the process.[v]

However, as the popular phrase goes, “if you mess with the bull you’ll get the horns.” The market has been messing with the bull for too long, so it is only appropriate to prepare for the horns. The same can be said for the unicorn, known for its mythical horn. This can only mean bad things for the ever-expanding tech bubble. Ben Gurley, a partner with Benchmark Capital who spearheaded the firm’s successful investment in Uber, has compared the current “tech-funding climate to the mortgage industry’s precise embrace of collateralized debt obligations,” and those who lived through 2008 all know how that ended up.[vi] Because of these negative outlooks, many people are beginning to question what implications Snapchat’s soon to be IPO will have on the market and other infamous “unicorns.”[vii]

The Snapchat IPO

            Snapchat, a popular image messaging and multimedia application, is poised to go public in March of 2017. This impending public offering has been in the limelight since the company’s founder turned down a $3 Billion buyout offer from Facebook in 2013. Snap, the parent company of Snapchat, made its confidential IPO filing with the SEC back in November of 2016.  The IPO is expected to raise around $4 Billion for the company, resulting in an overall valuation of $25 Billion.[viii] This would make the Snapchat IPO the largest U.S tech company offering since Facebook back in 2012.[ix]

Companies, such as Snapchat, go public for a variety of reasons. These reasons, among others, include a means for raising capital and a way for investors (including venture capital funds), executives and employees to cash out and realize some or all of their gains in their investment.[x] It also allows companies to gain credibility among the public, and within their industry, by showing they were able to meet the rigorous disclosure requirements set forth by the SEC.

A company going public also has a variety of other benefits. Because the true value of private stock is often difficult to determine (especially for tech companies), going public allows shares to be priced in the market, thus providing another method of valuation for the company. These market valuations could cause a lot of trouble for tech companies that might not meet inflated future expectations.

If Snapchat’s IPO goes well and shares meet or outperform price expectations many “unicorns” may follow suit. If successful, many other tech companies may follow in order to achieve the same results. Other “unicorns” expected to join the IPO stampede in 2017 are Spotify (a popular music service provider), AppDynamics (a software maker), Palantir (a software analytics company), and Pinterest (another popular social network). It will be important to see how other “unicorns” perform in the public market in the wake of Snapchat’s upcoming offering.

However, if Snapchat’s IPO happens to go poorly because of the company’s apparent (in my personal opinion) overvaluation, it may lead to the market losing faith in the IPO as a viable exit route for future “unicorns.” For this reason, it will be very important to see how Snapchat’s shares perform out of the gate. If expectations are not met, and shares plunge in value, many similar IPOs may be put on hold, much like “mega-unicorns” Uber and Airbnb have already decided to do.

Artificial valuations for young companies and start-ups, most of which may be operating at a loss or making no money, are continually pumping hot air into the current tech bubble. With their sharp horns, a unicorn such as Snapchat may not meet their valuations and pop this bubble. This would likely result in calamitous consequences for the global market.

The infamous burst of the dotcom bubble of 2000 was triggered by the sudden collapse of companies in the market, and had a multitude of far reaching repercussions. Many argue, including myself, that the unforeseen valuations of new age tech companies through private offerings are the current trigger, and “unicorns” like Snapchat looking to go public are holding the gun.

            If this tech bubble were to burst we would likely be lead into a period where investment firms begin to scale back on their investments. This would cause difficulties for many start ups looking to gain traction and obtain initial funding rounds.

To leave this at a cliffhanger, we are currently at a crossroads; will Snapchat’s IPO lead to a stampede of unicorns, or a bursting tech bubble where inflated valuations crash back down to reality?

[i] http://www.investopedia.com/terms/u/unicorn.asp

[ii] http://www.telegraph.co.uk/business/2016/10/22/snapchat-is-pumping-the-next-tech-bubble-with-more-hot-air/

[iii] http://fortune.com/2017/02/07/everything-to-know-about-snaps-ipo/

[iv] https://techcrunch.com/2017/02/01/the-top-unicorns-are-overvalued/

[v] https://www.bloomberg.com/news/articles/2016-10-20/the-tech-bubble-didn-t-burst-this-year-just-wait

[vi] Id.

[viii] http://www.investors.com/news/technology/will-snapchat-ipo-set-stage-for-stampede-of-unicorns/

[ix] Id.

[x] Id.

Uber battles lawmakers to capture Taiwan market

By Ramona Barrett

December 2016

Uber entered the Taiwan market in 2013.

Outraged by its growing popularity, local taxi drivers held a major protest earlier this year.

Luckily, or so it seemed, they found an ear in government.

In an effort to protect the domestic taxi industry, which includes 80,000 legally operated cabs, the Taiwan government has subject Uber to increasing legal obstacles.

Though, instead of curbing to pressure to leave the market, Uber has gone toe-to-toe with the government, challenging it to bring its laws up-to-date with innovation in the industry.

Uber is registered in Taiwan as an information services company, though it is a well-known transportation company.

Taiwan views this as a major misrepresentation of its services.

To make matters worse, it operates its transportation services illegally by using private drivers and cars without business operation permits.

In addition, according to Taiwan Vice Transportation Minister Wang Kuo-tsai, they fail to honor labor and health insurance premiums for private drivers, or to settle disputes between private drivers and consumers.

To comply with existing rules and regulations in Taiwan, Uber would need to apply to the government to set up a legal taxi service company and employ qualified drivers and taxi cabs.

Making it clear that Uber would need to fall in line, Wang stated the “government won’t enact a new law or amend the existing rules just for one single company.”

Still, Uber refuses to do.

Uber Taiwan’s general manager Ku Li-kai stated that Taiwan does not need another taxi service company, and setting one up is not in line with their business model.

Instead, they would be willing to negotiate with the government for a more mutually beneficial plan.

Keep in mind that Taiwan is one of Uber’s fastest growing markets, with approximately 10,000 registered drivers and 1 million members.

Back in July, Taiwan announced a three-pronged approach to curb Uber, and it appears to be following through with its plans.

Just a month later (August), Taiwan ordered Uber to pay back taxes owed since it entered the market in 2013, an amount then estimated to be a hefty $6.3 million.

This came as a result of the Taiwan government changing its tax structure for foreign online businesses, bringing Uber on the hook.

In response, Uber told Reuters: "Uber is meeting all of its tax obligations under relevant local laws."

In an alternative attempt to curb Uber, just last month (November) Taiwan called for Apple and Alphabet (the parent of Google) to remove Uber, as well as its newly launched UberEATS, from their mobile application stores. 

“Uber has not done what it says it will do. So, we are looking at another way by requesting its apps be removed from Apple and Google [app stores],” said Liang Guo-guo, spokesperson for Taiwan’s Directorate General of Highways.

They did not clarify how they would handle already downloaded Uber applications.

In addition, it remains to be seen if people will find alternative ways to download the application.

Uber has expressly challenged the island to amend its laws to keep up with innovation in the industry, as it faces being potentially banned due to regulatory breaches.

Uber’s chief adviser David Plouffe warned, if "Taiwan wants to be a Silicon Valley of Asia, potentially pushing out an innovative company like Uber is not the right message."

Otherwise, they might just get left behind.

He pointed out that other countries have actually been supportive of Uber, passing more than 100 laws to allow them to operate more smoothly.

He also noted some of the benefits of allowing Uber to remain, including more jobs and spending to stimulate their economy.

An open letter penned by Uber stated, “by promoting Taiwan as ‘Asia’s Silicon Valley’ and appointing a digital minister, your commitment to establishing a tech-friendly policy environment for startups to thrive is clear,” but the legal obstacles posed “directly threaten the interests of over a million Taiwanese citizens, especially the mothers, fathers, retirees, professionals, and the otherwise unemployed who have come to rely on the economic opportunities Uber has created.”

Taiwan did not answer that call in the way Uber had hoped they would.

Back in July, Taiwan’s three-pronged approach to cracking down on Uber included slapping them with hefty fines until they succumbed to legalizing their operations.

Several amendments were proposed to the Highway Act for illegal transportation services, including an increased penalty, revocation of driver and vehicle licenses for up to two years, and a 10% reward for reporting illegal activity.

To fight back, Uber published advertisements on the front page of four major newspapers in Taiwan.

One advertisement stated: “The government suppresses new technology. So much for Asian Silicon Valley!”

Another read: “We embrace the power of moving the nation forward, but the government is imposing a NT$25 million penalty as a barrier.”

The advertisement also encouraged people to sign a petition asking the Taiwan government to amend the Highway Act to list Uber as “internet transportation service providers.”

Uber was not successful in its attempt to sway lawmakers.

Last week, the Taiwan legislature passed the amendment bill that will drastically raise the maximum fine for illegal passenger transportation services from between NT$50,000 (approximately $1500) and NT$150,000 (approximately $4600) to up to T$25 million (approximately $780,000).

This is the highest level for illegal transportation services fines in the world.

This is even higher than the fine for drunk driving on the island.

To date, Uber has racked up NT$66.05 million worth of fines, and their drivers have been fined NT$20.028 million on the island.

UberEATS motorcyclists who deliver food have also been fined.

In the past, Uber operations have suspended sporadically due to police coming down on them.

But as a result of this new law, provisions of which are expected to take effect next year, operators may have to close up shop for good.

In response, Uber stated “we are very disappointed to see the Legislative Yuan pass the amendment bill raising fines against driver-partners on the Uber app to the largest anywhere in the world” but “we will continue to seek a constructive conversation with the Taiwanese government to ensure Taiwan gets the full benefits that ridesharing brings to riders, drivers and cities. We will also study the legislation before deciding on our next steps.”

Just days after the Highway Act amendment was passed, Uber Taiwan began a new campaign offering coupons worth up to NT$10,000 (US$312) to customers for posting a selfie with an Uber driver (and a corresponding hashtag) on Facebook.

Some drivers were reluctant to appear in the selfies for fear of it being used as evidence against them in light of the new amendment.

Based on recent events, it seems this battle between Uber and Taiwan will not be ending any time soon.

Note that Uber has been encountering similar legal obstacles in other Asian markets, including Japan, Korea, Thailand, and Vietnam.

In the US it is banned in specific parts of Alaska, Alabama, Florida, New York, Texas, and the entire state of Nevada.

Sources:

-        http://www.chinapost.com.tw/editorial/taiwan-issues/2016/11/21/484530/p1/Startups-need.htm

-        http://fortune.com/2016/12/16/uber-taiwan/

-        http://fortune.com/2016/11/16/taiwan-apple-google-uber-app-store/   

-        https://international.thenewslens.com/article/56189

-        http://www.chinapost.com.tw/taiwan/business/2016/07/19/472671/MOTC-announces.htm

-        http://mashable.com/2016/08/22/uber-taiwan-tax/#Poz.Cug5YSqq

-        http://www.pymnts.com/mobile-applications/2016/taiwan-asking-apple-google-to-pull-uber-app-from-their-app-stores/

-        http://asia.nikkei.com/Business/Companies/Uber-chief-adviser-pushes-ride-hailing-service-s-case-in-Taiwan

-        http://www.forbes.com/sites/ralphjennings/2016/11/18/uber-is-getting-an-upper-hand-in-hostile-but-pivotal-taiwan/#784f9cec30f7

-        http://www.thedailystar.net/bytes/the-uber-controversy-1321321

-        http://www.taipeitimes.com/News/taiwan/archives/2016/11/29/2003660218

-        http://www.thestar.com.my/tech/tech-news/2016/12/19/uber-says-disappointed-by-taiwan-law-raising-ride-sharing-fine-to-highest-level-globally/

-        http://www.afr.com/technology/web/ecommerce/uber-drivers-face-1m-fines-as-taiwan-opposition-grows-20161206-gt5hbh

-        http://www.taiwannews.com.tw/en/news/3055203

News Startups: Different parts of the world, different rules you got to follow

By: Entrepreneurship & Innovation Clinic Student

December 2016

After the 2013 Meltwater case, news aggregation startups became unable to adopt fair use as a defense against the copyright infringement claims in the United States. Even a fraction of the original news, as few as four words from the headlines or ledes, used in thumbnails would be considered as a copyright infringement on the original news publisher. Most news aggregation startups, however, do not limit their target customers to the United States. Once an app is successfully developed, a startup can easily expand to the global market without much further cost. In this article, we will review how the other parts of the world regulate this murky area of internet copyrights.

In 2013, United Kingdom Supreme Court reached surprisingly different outcome from the U.S. Meltwater case with same questions and essentially the same nature of plaintiffs and defendants. Public Relations Consultants Association v. The Newspaper Licensing Agency Ltd. ([2013] UKSC 18, on appeal from: [2011] EWCA Civ 890 ) The U.K. Supreme Court ruled that Meltwater Group in U.K.’s Search & Link service without license within the news aggregating app did not infringe the copyrights of the original news publishers under the current Copyright law in the UK. Meltwater provided an online media monitoring service called Meltwater News. Subscribers to the service were sent emails containing the headlines of online articles, hyperlinks to the articles' publishers' websites and short extracts of the articles themselves. UK Supreme Court strongly expressed the view that the temporary copies exception should apply to on screen and 'cached' copies of copyright protected works generated in the course of ordinary browsing. Under the EU copyright law, CJEU ruling also decided that the linking itself is not a copyright infringement. See Svensson and others v Retreiver Sverige, (C-466/12). In Svensson, the CJEU ruled that a website providing links to copyright-protected content on another site was not, in and of itself, copyright infringement.

Along with many other European jurisdictions, Germany does not have a clear recognition of the concept of fair use or fair dealing as a defense of the copyright infringement. Currently, providing Search & Link service without a license within the news aggregating app may have a legal problem in Germany especially after the 2013 amendment of Copyright Law with ancillary copyright for press publishers. Article 8 of the Act of 1.10.2013 (Federal Law Gazette I p. 3714) When the German Publishers had demanded a royalty from Google News in 2014, however, Google had started removing snippets from the Google search result. As a result, the publishers faced plunge of traffic to their web page and a severe drop in revenue. Consequently, the majority of publishers granted royalty-free licenses to Google to ensure that their content to be included in Google News once again. See “Germany's top publisher bows to Google in news licensing row.” The German Copyright law prohibits news aggregators’ free-riding from the Search & Link business model; however, German publishers and the regulating body found it difficult to force huge news aggregators like Google News to pay the royalty fee.

In South Korea, providing Search & Link service without a license within the news aggregating app may not have a legal problem under the current Copyright law in South Korea. Recently, South Korea Supreme Court ruled that Search & Link service itself is merely a service of providing a passage to a location of the information on the internet and therefore does not constitute illegal reproduction or transmission of news articles under the current Korean Copyright law. 대법원 2009. 11. 26. 선고 2008다77405 판결, 대법원 2010. 3. 11. 선고 2009다80637 판결.

Canada might be the best country in the world right now for news aggregating startups. In Canada, providing Search & Link service without a license would not face any copyright infringement claim under the current Copyright law in Canada. See Warman et al. v. Fournier, FC 803 (2012). The controversy involved three separate claims for infringement of copyrighted works. When Fournier posted an excerpt of the article, Warman alleged that the posted excerpts were substantial reproductions of the work within the meaning of section 3(1) of the Copyright Act. The court, however, found that there was no infringement. In determining substantiality, the court applied a five-part test. The relevant factors to be considered include:

a. the quality and quantity of the material taken;

b. the extent to which the respondent’s use adversely affects the applicant’s activities and diminishes the value of the applicant’s copyright;

c. whether the material taken is the proper subject-matter of a copyright;

d. whether the respondent intentionally appropriated the applicant’s work to save time and effort; and

e. whether the material taken is used in the same or a similar fashion as the applicant’s.

The court ruled that the posted headline, three complete paragraphs and part of a fourth were the opening “hook” of the article and determined that it was not substantial to be a copyright infringement. The court further stated that even if the posted portion is substantially enough to be considered as a copyright infringement, Fournier’s reproduction constituted fair dealing for the purposes of news reporting, pursuant to section 29.2 of the Canadian Copyright Act. In determining whether the fair dealing is appropriate defense of copyright infringement, the court considered 6 fair dealing factors, (1) the purpose of the dealing; (2) the character of the dealing; (3) the amount of the dealing; (4) alternatives to the dealing; (5) the nature of the work; and (6) the effect of the dealing on the work. Balancing all the factors together, the court found that “the reproduction… falls within the fair dealing exception for the purposes of news reporting.” For the linking, the court also ruled that a hyperlinking is a mere redirection to the original content and not a copyright infringement.

From the above cases, we can see that each nation approached differently on copyright issues in Search & Link business. Unlike in the States, most of the world do not Search & Link as a blatant copyright infringement. Instead, they view it as a providing mere passage to the original article and usually do not forbid when such linking entails headlines or thumbnails from the original contents.

IP protections

By: Entrepreneurship & Innovation Clinic Student

December 2016

            Many start-ups and small businesses start with an idea. They grow around that idea, nurture it, grow it, and soon they have a successful business. But how can you protect that idea? That is where intellectual property and the various kinds of protections come in. Intellectual property protections vary, but their ultimate goal is to protect the work that has come from your idea. Many individuals hear about the different types of intellectual property and think that they want one type, when in reality they another may be better suited for their needs.

            There are four main types of intellectual property: copyright, trademark, trade secret, and patents. Each of these types of intellectual property protect a different type of work. Some, however, do overlap. The protections offered by each type of intellectual property also differ and are better suited for certain situations. Keep in mind, intellectual property only protects the expression of ideas, not the ideas themselves. You must do something other than just having an idea in your head.

            A copyright is the exclusive right to print, publish, reproduce, create derivative works, and license a work of art. A work of art is a rather broad definition. For example, it includes the traditionally thought of forms of art such as paintings and books, but it also includes the code of software. However, in order to be eligible a copyright must meet three requirements. First, a copyright must be fixed in a tangible medium. For conventional art this is simple. A painting or a book are painted or printed on something physical. For other forms of art this is more difficult. Look at software code for example. It is written on a computer, but this is sufficient to be considered fixed for copyright. The second requirement is that the art is original. Essentially, this means you cannot copy someone else's work. Finally, the work must meet a minimum level of creativity. You must add something to the art that is creative, though this is a very low threshold. Keep in mind, a fact cannot be copyrighted, because there is no creativity here. However, a book on alligators that contains many facts can be copyrighted because there is creativity in the words you chose and the way the facts are presented.

            Copyrights give a host of protections for the works they protect. As above, you can print, publish, reproduce, license and creative derivative works (works based on the original, such as sequels or movies based on a book) exclusively. A copyright comes into existence the moment that the work of art is created. You do not need any additional steps to actually get the copyright. However, if you wish to actually enforce your protections, via court orders, lawsuits, etc. then you must federally register your copyright with the US Copyright Office for a relatively low fee. Once registered, a copyright will last for the life of the author plus seventy (70) years. After this, the art goes into the public domain and can be used by anyone.

            You may want to get a copyright for any art that you create. This is the most obvious use. But also for things that you plan on creating sequels or derivative works of. Copyrights are excellent for software codes as well because code is something that is modified fairly regularly with updates, so a copyright will automatically attach with these updates.

            A trademark protects an entirely different work than a copyright does, though the actual subject may be the same. A trademark is a word (or phrase) or design that a business uses in commerce. Essentially, a trademark is used to protect your brand. Trademarks have fewer requirements than copyrights. A trademark must be used to designate a source of a product (the producer) and used in commerce. For example, a label on a product would be a trademark. The mark could be a series of words or a design. However, certain marks cannot be protected. Generic trademarks just describe a category of products or services. For example, you could not trademark the mark Jacket for a line of jackets. Descriptive marks are also too general and generally describe an aspect of the good. The mark Leather would likely be considered descriptive if it were for a line of leather jackets as it describes a part of the goods. Descriptive marks can, however, pick up secondary meaning. This means the mark is so tied with the product that it gains a new meaning and people think of the product when they hear the mark. This generally takes place over time. An arbitrary mark is protectable because the meaning of the word is unrelated to the goods. Using the mark Book for a line of jackets would be this. Finally, fanciful marks are protectable and are essentially made up words. For example the made up work "Anter" would be a fanciful mark on any product.

            Keep in mind, trademark protection only allows you to prevent other people from using your mark in commerce if it is being used for the same type of goods you make. You could prevent someone from using the Book mark for a line of jackets, but not if they use the mark Book for fresh produce. Most states have common law trademarks that begin the moment the mark is used in commerce (federal trademark protection uses this date as well) but they are limited to the state and general area the product is sold. Federal protection applies throughout the country and must be registered with the US Patent and Trademark Office (USPTO).

            Trade Secrets function differently. A trade secret is a type of technique, recipe or business model that a business uses and wants to keep secret to prevent competition from having it. There are six factors that are considered in determining whether something is a trade secret. These boil down to whether or not the trade secret has been kept as a secret. If it has, then an employer can generally prevent their employees from divulging their trade secrets to others. It is especially useful in preventing corporate espionage and preventing former employees from giving away trade secrets to their new employers. The Uniform Trade Secret Act protects trade secrets at the state level. Not all states have adopted this act, however, and thus each state may have some differences. There is no federal trade secret protection. The benefits of trade secrets are that they do not cost anything to protect and there is no need to register it. Simply keep your practice secret and include clauses in contracts in order to treat the practice as a trade secret.

            The last type of intellectual property is patents. A patent protects inventions. In particular, getting a patent in an invention grants you the sole authority to sell, create, and distribute the patented object. Inventions include the things most people think of, such as a light bulb or a type of television, but could also include software codes, algorithms, and biological constructs. They are filed with the USPTO. In order for an invention to be patentable it must meet several requirements. First, it must be a patentable subject matter, meaning it can't be something like art. It must also be novel. This means that the invention has to be new in some way, or at least a part of it is. Third, the invention must be non-obvious. The invention can't be something that just be simple to figure out or just an addition of one thing to something else. There needs to be an inventive step. Finally, the invention must be useful.

            While patents are often thought of as the most highly sought after intellectual property, they are particularly difficult to get. The USPTO has high standards for what they accept as an invention deserving patent protection. Furthermore, the protections are not limitless. Patent protection only lasts for twenty years; after which anyone can use the invention. Patents can also cost upwards of thousands of dollars to get. Therefore, getting a patent is not necessarily in the best interest of every business.

            Ultimately, it is up to the individual business to decide what is the best intellectual property protection to pursue. In some instances, this is easy, as there is no real question about whether something falls into one category and not the other. But in others there may be some confusion. For example, would a copyright or a trademark be better on a logo? Would both be beneficial? Having a knowledge of the different types of intellectual properties can help with this decision.