Grant Thorton on the IPO Crisis
Grant Thornton has prepare a paper entitled Market Structure is Causing the IPO Crisis . Here is my understanding of
their position. The IPO market, especially for small IPOs started to decline before Sarbanes Oxley. The Manning Rule and Order Handling Rule and decimalization decreased the margin for handling illiquid securities by brokerage houses. Finally, online brokerage accounts have killed quality research and encouraged speculation.
The things that effect the IPO market are the cost of going public, the return for going public, the alternatives to going public, and the willingness of an investment bank to take you public (might be part of the cost). While not stated explicitly in the report, they seem to imply that there is little incentive for investment banks to take small companies public or to create a market in their securities after the fact. If true, I think this would contribute to the IPO downturn, but I do not think they have stated their case very strongly. Read more »
Sarbox Update
According to the NYtimes the House Financial Services Committee approved an amendment to Sarbanes Oxley (Sarbox) that would allow some companies to be exempt from this legislation. While the article implies that many companies would not be exempt under this amendment, the amendment only applies to companies worth less than $75 million and asks for a study of whether companies worth less than $250 million should be exempt.
Sarbanes Oxley has severely damaged the technology start-up market and the financial industry in the U.S. Sarbox is very expensive: including enormous direct and indirect costs to our economy and to innovation. It has not met its goals of improving the quality of auditing or preventing fraud. The effects of this law include fewer public companies, fewer companies going public, more companies choosing to go public in foreign markets, absurdly high auditing expenses and a significant decrease in risk capital.
For More information see Sarbanes Oxley – Is the Medicine Worse Than the Disease – 1 and Sarbanes Oxley – Is the Medicine Worse Than the Disease – 2 .
Does Net Neutrality Inhibit Innovation?
Any government restriction on how the internet can operate will by definition limit innovation. The FCC’s Net Neutrality proposal violates the “Rate Law of Innovation”, which states that rate of innovation is directly related to the number of elements that innovators have available to them. The Net Neutrality rule limits how many variables or elements that innovators have to innovate. See the Laws of Innovation for more information. All the major engineers who developed the internet are opposed to the FCC’s Net Neutrality rules. According to Andrew Orlowski, “Engineers fear rash legislation would inhibit the ability of systems engineers to improve latency and jitter issues needed to move data at speed.” See Mr. Orowski’s article for more information. Read more »
Patent Office Allowance Rate Falls to 42%
According to the AIPLA (American Intellectual Property Association) the allowance rate for patent applications in the U.S. fell to 42% in the first quarter of 2009.
This continues the trend of falling allowance rates that started in 2002. Why has the allowance rate changed so dramatically in the last six years? Sometime early in this decade, the USPTO started to define the “quality” of examinations by the allowance rate. The USPTO tracks the allowance rate of every examiner and grades the quality of their examinations by their allowance rate. If one examiner’s allowance rate is higher than the average allowance rate of the group they work in, their examination of applications will be considered to be of lower quality. If an examiner never allows any patent applications, they will be considered to have the highest quality examinations. This has created a perverse incentive for examiners.
For an update on the allowance rate click here.
Scarcity and Intellectual Property: Empirical Evidence of Adoption/Distribution of Technology
A number of scholars[1] have suggested that the logical basis for property rights is scarcity. Property rights efficiently allocate these resources and avoid conflicts. These scholars argue that ideas and inventions are not subject to scarcity and therefore intellectual property rights should not exist. These arguments seem to be particularly prevalent among Libertarians, including the Cato Institute and Von Mises Institute, and the open source community. Read more »
Sarbanes Oxley – The Medicine is worse than the Disease: Part 2
None of these securities laws were able to prevent the stock market decline of 2000. Sarbanes Oxley was passed in 2002 in reaction to several corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, and WorldCom. The legislation set new or enhanced standards for all U.S. public company boards, management, and public accounting firms. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Read more »
Sarbanes Oxley – The Medicine is worse than the Disease: Part 1 Background
Sarbanes Oxley was passed in 2002 in reaction to corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, and WorldCom. The legislation set new or enhanced standards for all U.S. public company boards, management, and public accounting firms. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. This law has effectively killed off the possibility of going public in the U.S. Read more »
About
This blog is devoted to intellectual property innovation, patent law and innovation. The moderator, editor, and main 
author is Dale B. Halling. Mr. Halling is patent attorney and entrepreneur. As a patent attorney, Mr. Halling, has represented numerous Fortune 500 companies including, McDonnell Douglas, Boeing, Motorola, Ameritech, SBC, MCI, Cypress, and numerous technology start-ups. He has helped his clients obtain patents worldwide. Mr. Halling has a BS in Electrical Engineering from Kansas State University, an MS in Physics from the University of Texas at Dallas and a JD from St. Louis University. Mr. Halling is the author of the book “The Decline and Fall of the American Entrepreneur: How Little Known Laws are Killing Innovation.”
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