Ernest Grumbles III

Ernest Grumbles III is an IP (intellectual property) and business development attorney at the Minneapolis firm Adams Monahan, where he works with entrepreneurs and early stage, tech-oriented enterprise. He is also Co-Founder of MOJO Minnesota, a collective supporting entrepreneurs and promoting innovation policy and community in Minnesota. He enjoys fresh air and lots of caffeine and is constantly trying new things (instead of sleeping). He may be reached at: egrumbles@adamsmonahan.com.

Posts about Politics

Our Friend, the Photo Cop

Posted by: Ernest Grumbles III Updated: April 29, 2013 - 7:52 PM

Earlier this session, the MN Legislature tabled a bill to legalize the use of photo cop (red light cameras) in Minnesota. Perhaps I was the only one who was dismayed, but I hope they revive (and pass) it. Here's why.

There are four facts that bear on photo cop:

(a) running red lights is dangerous (both to body and property);
(b) people will run red lights (and they are with increasing frequency);
(c) there will never be enough police to monitor red lights; and
(d) photo cop will monitor and identify those running red lights for appropriate fines and, thus, deter others from ignoring the law.

I could stop there and go right to the argument that the legislature should pass a proper photo cop bill. But I want to expand on some of the points and also address some of the (outlandish) counter-arguments.

Safety: Is there anyone who seriously doubts that running red lights is dangerous, both to the driver doing it and the unfortunate other drivers around them? Real world stats say otherwise: every year in the U.S., driver failure to obey traffic signals results in approximately 260,000 accidents, 200,000 injuries and 1000 deaths. Of the 1,000 deaths, roughly half of those are suffered by pedestrians, bicyclists and non-driver vehicle occupants. Running a red light is like playing with a loaded gun. Good luck with that. Photo cop cameras act as a deterrent to people who otherwise would disregard a manifest human safety risk. If photo cop saved 50 lives a year, that would be sufficient.

It's the law: Minnesota Statute sec. 169.06, subd. 4 states that "the driver of any vehicle shall obey the instructions of any official traffic-control device applicable thereto." It's that simple. If you run a red light, you've broken the law. And it's not like getting a parking ticket. You've chosen to create a safety hazard for yourself and other drivers (and pedestrians, bikers etc...) around you. See above. If private pilots made a maneuver even remotely like running red lights (or tailgating, or excessive speeds in proximity to ground personnel or other aircraft), they would be grounded and suspended and could have their license revoked altogether.

What about heavy equipment operators? They're subject to random drug testing, security cameras, regular safety training and equipment inspection etc... Wanton disregard for safety regs would result in suspension/termination of employment. Yes, but that equipment is heavy and dangerous. An SUV with a mass of 4,000 lbs traveling at 50 mph is: a large metal box with enough crushing power to match industrial equipment.

Just rewards: If you're going to ignore safety restrictions on vehicles, you need to pay a fine. The photo cop captures license plates of vehicles traveling illegally through a red light. You then get a ticket for creating a safety hazard. If you weren't driving the vehicle at the time, you may inform the court. The ticket can then be dropped. Of course, you let someone operate your vehicle in an unsafe manner. Where is the moral objection in at least hauling you in to account for the safety hazard? Wouldn't you want to know your car had been driven in an unsafe manner and by whom? I sure would, especially if it's one of my children.

Public crimes aren't private: I read that some were concerned about privacy and did not want their license plates photographed - like it's a civil rights issue. Of course they don't. If I was regularly committing tax fraud, I wouldn't want the IRS to be able to inquire into my finances. Photo cop only snaps photos of apparent violators. Then police review to verify the violation. No violation, no fine. There's no privacy right when you're committing a crime in open view around many other drivers, pedestrians etc..(courts agree). Are you going to complain about the store cameras after you've shoplifted? And what about the civil rights of the family in the vehicle you just plowed into? States with more debate over the role of government have photo cop, including Texas (my home state). The civil rights argument falls apart.

Enough police: Drive around a city. How many intersections are routinely monitored by police? There aren't enough to prevent the violations, and they've got more substantial violations to monitor and investigate (robberies, crimes of violence etc...). That doesn't mean the traffic signal violations aren't a public hazard. Strangely, one of the major MN police officer associations came out against the measure on the basis the cameras were unpopular, and the public would get frustrated with the police for having to enforce. I'm pretty sure that's not a good way to make policy decisions.

It's a revenue scam: Some argue that the photo cop will just be used by the cities, etc... to make money. You could make the same argument about any ordinance violation where a fine is paid. Are there citizens protesting at city hall about parking fines, which don't usually involve any safety risk? Why would they protest a tool that will reduce a highly visible and unsafe moving violation? It's not unfair to make those imposing the safety risk pay for misuse of their vehicle.

Common sense: Photo cop is a cost-effective way to reduce red light violations that indisputably impose unnecessary risk of injury to persons (like children, pedestrians, other drivers) and property. The Legislature should revive the proposed law that will let Minnesota join the 26+ other states that have photo cop.

Startup Crowdfunding is Here

Posted by: Ernest Grumbles III Updated: April 1, 2012 - 1:12 PM

If you have a great idea - whether in the creative, charitable or entrepreneurial vein - where do you get the money to launch?  You can pull from your own pocket.  And most do - at least to get things going initially.  Companies like Medtronic and non-profits like CaringBridge started at least initially with founder resources.  But unless you're wealthy, this often can only get you so far.  Sometimes you need to scale fast - in response to competition or market demand.  You could ask friends and family, the usual next step.  Again, whether this is viable depends on the kind of friends you have.  Banks?  Only if you have a going concern?  Angels or VC's?  Yes, if you have a track record or are an amazing networker (assuming the idea's good enough).  IPO?  Only when you're already in the market and successful.

Of course, the non-profit sector has been able to engage in large-scale public fundraising for a long time (through online campaigns).  And you can go on Facebook now and appeal to your social network to support a charitable initiative.  There are also platforms such as IndieGoGo, StartSomeGood and others that allow you to seek donations from the general public through social media.

The most well-known crowdfunding platform, Kickstarter, has an amazing story.  Originally focused on creative projects (films, plays etc...), it's expanded to include product development.  I had a client, Peak Design, that raised over $300K for the launch of its Capture Camera Clip (released last summer, now sold worldwide).  One game company raised over $3M to fund development of a new videogame.  Notably, these are not equity investments.  You contribute for designated benefits, usually the good in question, plus fun stuff like t-shirts or product add-ons.  Basically you're pre-selling your product to fund its finalization and market release.  Brilliant strategy.  Market test, complete R&D and take the first large orders all in one.  

But what of the lonely entrepreneur?  The SEC (and related securities laws) have long thrown up barriers to easy public equity fundraising for new business ideas.  Following the Depression, laws were put in place to protect the public from fraudulent stock sales.  Lengthy disclosures and other processes were required to ensure that the public would know what it was buying and what the true risks were.  Of course, these only applied to public offerings.  Private stock sales to "accredited investors" (wealthy individuals) were permitted.  But these exemptions apply to a very small percentage of Americans.  So only well-connected entrepreneurs with access to sophisticated investors were allowed to avoid the very expensive and time-consuming public stock registration processes.  In essence, average citizens have been effectively prevented from supporting startups in their communities.

Thankfully, necessity is the mother of invention.  And our economic woes, now 3+ years running, have demanded new tools and strategies to support innovative enterprise.   In light of the ease of information-sharing and success of crowdfunding sites like Kickstarter, Congress finally has delivered a means to let entrepreneurs to fundraise publicly from average Americans.

The JOBS Act of 2012, passed with overwhelming bipartisan support and now on Obama's desk (to be signed this Thursday), will allow entrepreneurs to raise up to $1 million per year through crowdfunding.  While the companies using crowdfunding will still need to "register" with the SEC, the paperwork is minimal compared to traditional IPO requirements.  Sites seeking to host crowdfunding efforts also must register with the SEC, advise investors of risk and take steps to prevent fraud.  For more info, see http://venturebeat.com/2012/03/31/jobs-act-law and http://thomas.loc.gov/cgi-bin/bdquery/z?d112:h.r.03606:.

The SEC will be developing regulations and more details will follow over the next few months.  But this is a great step to allowing the 99% to help support job-creating startups.  While there concerns about fraud on average investors, we have seen with the Enron scandal that traditional SEC practice hasn't stopped occasional rogue conduct.  By letting consumers share information and scrub opportunities in the ways they do best on the Internet, the overall risk of fraudulent investments will likely go down.  Startup investing is inherently risky.  No change to that.  But given all the legal ways to burn cash (gambling etc...), why not let citizens take a chance and invest in their local startups.  The JOBS Act will finally provide the means.

 

Is Government the Enemy of Business...? No.

Posted by: Ernest Grumbles III Updated: April 1, 2011 - 7:48 AM
In a previous post, I shared some thoughts on why entrepreneurship is a social justice issue – namely that innovation and commerce are fundamentally human activities. You can’t separate people and business.  And the business of the people is what generates amazing opportunities for growth, creativity and improvement in quality of life. In short, “business” is not the enemy of the people, but a vital activity of the people and society at large. Individual businesses that get this tend to have amazing success. 
 
I wanted to flip this around and deal with another false supposition – that government (of the people) is somehow an enemy of business. There is talk (and action) in a number of states to strip government of its economic development role based on the notion that government can do nothing to promote the economy, only shackle it. But government is not the enemy of business and the economy – anymore than it’s the enemy of the people. 
 
Government is Us
 
Let’s start with a different way to think about government. Government is not a “them.” Neither is “business” a “them.” Rather, both are “us.” We have the privilege and good fortune to live in a democracy – meaning, the government is picked by us. And that’s true at every level from city council all the way up to the President. The government is us, which, in 1776, was a radical notion. For better or worse (I think better), we don’t get to point to government as something imposed on us from above, but rather something raised up from the people. If you’re looking at government (or business), you’re looking in the mirror. And that includes everyone, even people you don’t agree with.
 
Civil Order is Essential to Society and Business
 
What about the notion that government is simply unnecessary? Let’s rewind for a minute. Imagine a scene on the landscape a million years ago. After a successful outing bagging an oversized mammal, two good folks got into a tussle over dividing it. Next thing, one is about to club the other into submission and it’s an all-out melee. Up walks the biggest/strongest member of the group, realizing chaos is about to ensue, and demands that the fighting stop (under penalty of more pain). The two fighters scratch their heads and figure out a better solution. Thus was born the rather common sense solution that an impartial figure could mediate conflicts and prevent them from happening in the first place – government. 
 
While we would be better off individually (for a short time) if we could do exactly what we wanted whenever we wanted, we would all collectively be worse off. Would you extend that privilege to all of your neighbors? People in other cities and towns? The answer is no, of course. Take pollution laws. Do you really think people should be able to dump garbage in city parks? Or dump harmful materials in lakes and streams without meaningful controls? While some people and businesses could save money by dumping, we would all be worse off, especially future generations. 
 
Government then acts to balance various private interests for the aggregate common good – a tricky feat no doubt. But a worthy endeavor. We, as the people, have the right to establish minimum standards of conduct that we all have to live by – whether as citizens or as the businesses those citizens create. Maintaining civil order and accountability to these minimum standards is what enables commerce to occur in a peaceable fashion – a level playing field for new business creation and innovation. Speaking of playing fields, wouldn’t it be great if we could get rid of referees and out of bounds in football? How about annoying rules against personal fouls? Clipping anyone? Exactly. The game would turn to chaos, and people would abandon it - like businesses do with commercial markets that lack order, regulation and consistency.
 
So government is – the people, giving voice to the people in all their variety – and it acts to prevent chaos and “ensure domestic tranquility.” Businesses rise and fall, but government must persist through it all. There are simply too many common problems in civil society that private business is unable or unwilling to address. 
 
Does the foregoing mean that government is always run smoothly, efficiently and honestly? No, clearly not. It’s a human institution. There are many ways government can be run better to achieve public good at lower cost. Are all private businesses run smoothly, efficiently and honestly? Of course not. But we hope most are. Government is not the enemy. And neither is business. Rather, poorly run government and business are the problem.
 
Government’s Essential Role in Economic Development
 
So let’s re-focus on government’s role in economic development. While government’s role as civil referee is critical to a stable economy, we can and should expect our government to be more than reactive on issues of economic development. Government can, and must, afford to take a longer range view than business. In close collaboration with the private sector, government can move on public policies and public-private initiatives that open new markets, support entrepreneurs, maintain a steady supply of educated, enterprising folks, preserve infrastructure and maintain that level playing field to let business – another vital human institution – thrive.
 
Will government be the primary player in economic development? No. It needs to come organically from citizens driving their dreams, creating new products and service, and generating opportunities for new jobs and new business development. On the converse, will business be the primary protector of public good? No. While businesses need to have a strong sense of community engagement and community values, and act on such sense, they need to drive for market success and compete in a way fundamentally different than government. We need both, working together in an open, honest, creative and non-adversarial way to keep forward progress.
 
So to the folks around the country pushing to out-source, privatize, and/or shutter government programs around economic development, I would first ask what steps they have taken to engage with government to evaluate, discuss and improve existing programs. Have they sat down with their fellow citizens in government to work on creative solutions? Have they considered the increased cost to their communities of shutting down existing government programs and creating brand new private ones (that will need foundation funding)? It may very well be that certain government programs are ineffectual and need to cease. But going into this analysis with the false belief that government can only hinder commerce pre-ordains the conclusion. 
 

Business and government, time to friendly up and have honest discussions about the critical role that each plays in our common peace and prosperity and how to achieve outcomes efficiently and collaboratively. 

Bilski, Business Method Patents and the Uncertainty Principle

Posted by: Ernest Grumbles III Updated: July 15, 2010 - 7:00 AM

On June 28, 2010, the U.S. Supreme Court issued its ruling in the biggest patent case in recent years, In re Bilski.  The case related to the patentability of business methods (steps in accomplishing a business task) and has been a lightning rod in the intellectual property world (and elsewhere) during its long path to conclusion.  These business method patents, typically directed to financial, Internet commerce, data analysis and business processes, are often written such that the particular machine or system used to perform the method is irrelevant.  Bilski himself had tried to get a patent on various methods of managing hedge fund risk.

In one view, the patent system is simply evolving to protect modern methods of technology, which may be platform neutral.  Think of the iPod, which can replace several other physical hardware tools.  In another view, such methods may not seem to require the perspiration of genius of physical hardware and seem to some to be too easy to create and protect.  Thus the questions posed to the Supreme Court: (a) do patentable methods require use of a particular machine or the transformation of physical matter; and (b) are business methods outside the bounds of patentability; and (c) what of Bilski’s methods of managing hedge funds.

If you’re Bilski, you now have certainty.  The Supreme Court unanimously rejected his claims as being “abstract” and unpatentable math formulas.  As to the other questions, we only know what’s not true.  Per the Court, methods or processes, to be patentable, don’t necessarily require the use of a particular machine or the transformation of matter.  That is simply one of the ways of evaluating whether a claimed method is too abstract to be protected.  Finally, the Court ruled that business methods are not per se unpatentable.  However, the converse is not true either – business methods are not always patentable.  Rather, each inventor’s claims will have to be evaluated individually as to whether they are too abstract. 

On this last point, if the Court had offered a definitive rule of unpatentability, thousands of patents across the country would have died a silent death.  Depending on your perspective, this was a good or bad thing.  For example, in the software community, there are many companies with valuable patent portfolios such as IBM who breathed a sigh of relief at the Court’s ruling.  And there are others in that community who believe there should be no patents on software inventions who were equally dismayed.

For the inventor community as a whole, the upshot of Bilski is that there is no strict test for determining patentability of methods and processes.  Flexibility and creativity in patent protection still reign.  But the lack of a bright-line test means that more cases will fall within the zone of uncertainty, which may increase the cost of patent protection and litigation.  While the Supreme Court may have been properly cautious in not issuing a ruling that stifled patent protection for future technologies, it did little to change the current realities faced by inventors and industry.  They will keep working and keep inventing, and the Patent Office will continue to sift the wheat from the chaff.

 

Memorial Day and the Loss of Gravity

Posted by: Ernest Grumbles III Updated: May 31, 2010 - 10:22 AM

 

This Memorial Day weekend, did you spend more time thinking about what kind of beer and brats you'd buy for your picnic than about the 1.2 million who have given their lives in uniform? Did the latter even cross your mind?

Yes, the President will be speaking platitudes (truthful) today about the courage and tragedy of those who lost their lives. But, I would wager that most people, while aware that Memorial Day is a federal holiday to commemorate our military dead, are indifferent to the gravitas of this holiday. Setting aside your position on the propriety of more recent armed conflicts (Iraq, Afghanistan, Vietnam), one thing you know for certain: many persons, typically young and working-class, have given their life wearing a U.S. uniform.

How to account then for the fact that this very serious holiday has become little more than the official start of summer? There are several forces at work, and I will try to parse them out.

Americans are Uncomfortable with Mortality

For a country remarkably comfortable with violent movie content and a high murder rate, we are uncomfortable with mortality. If we can avoid it, we do. Thus the proliferation of every possible treatment or surgery on the body to avoid signs of aging. If we are 60, we want to look 40. Memorial Day is a day to deal with the fact that our nation has lost 1.2 million soldiers and sailors acting at our direction (yes, we're a democracy). Since we're uncomfortable with this reality, and our own mortality, we have transitioned Memorial Day into a vapid summer launch celebration.

Americans Don't Like Downers

In a similar vein as the previous example, American are relentlessly optimistic and avoid undue analysis of their actions. We are not a moody people and don't like to dwell on the past, much less a bloody past (except when we re-enact Civil War battles - which we'll then ignore on Memorial Day). It probably would've made sense to have memorial periods after major conflicts and wars (like a 10-year period), give the dead their due and then "bury" that particular war in a proper way. Of course, we would not then have a 3-day weekend for decades. In a strange way, this is a strength - we can avoid replaying bloody history (as in Ireland, Rwanda etc...) by simply forgetting it.

Americans Ignore War Dead if They're Poor

While we enjoy violence as entertainment, our middle and upper middle classes have largely left the dirty business of the battlefield to the children of hard-working folks of rural areas and the inner city. With no draft, we have a regressive military - where the tax of death is meted out in greater quantity on the poor. Since the poor are a downer (see above), we tune out their deaths (like the thousands lost in the Middle East in the last nine years). In World War II and Vietnam, when the draft was still in place, everyone knew someone who had served (both my step-dad and father-in-law served in the Navy) and knew someone who died in war. This maintained a sense of community purpose and sacrifice. With the loss of a heterogeneous military, we have less reason to focus on the tragic aspect of Memorial Day.

War Now Polarizes

In recent decades, it has been more difficult to maintain citizen unity around military action (for better or worse). With the internet, we all have access to information (at least pseudo-information) and routinely reach our own conclusions about whether we should go into a certain war. This discernment started in Vietnam, though the average American then was not an anti-war protestor. With our complex political transitions from 1980 to the present day, partisan politics has smothered traditional patriotism. Our government has been challenged to develop common purpose around something as innocuous as a new national park, much less an endeavor of the scope of war. The political rancor over the "War on Terror," albeit justified, has compromised our ability, or willingness, to deal with the very real tragedy of lost lives and broken families.

All Holidays Drift Toward Oblivion of Meaning

Maybe this is too obvious. We can all complain that our particular pet holidays have become compromised through material culture (Turkey Day, Fireworks Day, Present Day, Egg Day... and the list goes on). In some ways, the holidays that still work are ones with little gravity or historical complexity to begin with - Halloween, Valentine's Day, New Year's Day). We can simply enjoy them and not have to worry about ignoring their real purpose (enjoying them is the purpose!). But to see holidays with religious or historical significance drift into "3-day weekends" and occasions to sell products or intoxicating beverages is a little disheartening.

Perhaps the end was near for Memorial Day in 1968 when Congress changed several federal holidays to the certain Monday of a certain week of the month. We would celebrate the holiday, but only if it gave us a long weekend. Sen. Daniel Inouye of Hawaii, a WWII vet, has tried for years without success to move Memorial Day back to its original May 30th date.

Vesting holidays with substance has become a matter of personal choice - not common social purpose or obligation. When you enjoy your Memorial Day picnic with family, and you should, will you remember the 1.2 million? Balance levity with gravity on this Memorial Day and keep in mind the sacrifice others have made for the safety of our Republic.

 

How to Choose Minnesota Judges? Quietly.

Posted by: Ernest Grumbles III Updated: April 5, 2010 - 8:17 PM

Since the dawn of recorded time, one of the functions of government is to help decide disputes between citizens and between citizens and government.  This prevents the unnecessary (and occasionally bloody) conflicts that ensue from self-enforcement of legal rights.  Think vigilante mobs and feuds.  If justice is going to be something more than vengeance, then it should be rendered impartially and equitably.  Citizens need to have confidence that the person deciding their disputes has an open mind, knows the law and complies with the law.  The process for selecting such people has been the challenge.

In the U.S. federal court system, judges are primarily chosen by presidential appointment. The U.S. Constitution provides for the Executive Branch to select, and Senate to approve, candidates for federal judge, who serve for life.  This system provides a deliberative screening process for candidates by elected officials, but also then shields those candidates from political influence after approval.  While there are rancorous confirmation hearings at times, they are infrequent.  If candidates are well-chosen and the process well-handled, the appointee humbly takes his or her position and begins handling legal disputes that are typically free of any political content.  Do you care how the Minnesota federal courts decide random breach of contract suits?  Likely not, unless you're personally involved.  But you do likely want the disputes handled properly.

An appointment system, free of nasty election politics, favors a quiet, neutral and independent judiciary, which is essential for public confidence in justice.    The downsides are that work performance can vary over a lifetime, and federal courts are largely left to have to police their own performance.  This is in marked contrast to legislators who are regularly turned out of office for policy or performance reasons.  There are bad judicial eggs occasionally and the U.S. Constitution provides for impeachment.  Thankfully, this rarely occurs - mostly because judges tend to behave themselves! 

The U.S. Magistrate judge system provides another good model for balancing the need for qualified candidates with judicial independence.  U.S. Magistrate Judges were a creation of Congress under Article I of the Constitution to relieve some of the occasionally severe backlog in the federal court system.  Magistrate Judges in Minnesota are appointed by the local District Court for fixed terms - with the input of a local merit advisory panel of attorneys.  Persons can apply for the positions openly, and the process typically produces high-quality judges - again free of any political contest or election.

And now on to Minnesota state court judicial selection and the current controversy.  Being a populist state, Minnesota requires judicial elections.  The Governor, however, may appoint persons to judgeships that become open in between terms (whether through retirement or death).  In actuality, most judges in Minnesota get on the bench initially through appointment because most judges leave before the end of their term.  This is largely a function of custom.  The Commission on Judicial Selection then handles applications for appointment and makes recommendations to the Governor. 

Nonetheless, all Minnesota judges, whether initially appointed or elected have to eventually stand for election, which can be contested.  While few judges are turned out in these elections, which happen every six years, the people have a direct say in who gets to decide civil and criminal disputes.  Incumbents are typically re-elected because really there's no reason to move them out.  They're not public figures regularly clashing with opponents on matters of social controversy.  Rather, they're doing their job of processing and disposing of the 1000s of lawsuits, criminal proceedings, family court spats and other matters requiring calm and impartial intervention. 

So what's the problem?  Some have tried to push judicial elections in Minnesota in the direction of partisanship, campaign promises and big money.  Recall the Wersal case to the Supreme Court.  Full-fight elections would be a bad way to go.  The beauty of the impartial court system is that when and if we show up there we will get a fair hearing from someone who has not already announced their position on certain issues.  Compare this to legislative elections where that's exactly what we want. 

In response to the increased conflict in judicial elections, there are current efforts to move Minnesota to a retention election system.  All candidates would be appointed by the Governor and all candidates would be subject to periodic retention elections.  The public would get to vote yea or nay on keeping the judge.  If a majority votes nay, the Governor would then need to pick a new candidate. This system would preserve public input, but would keep the current relative low profile of judicial elections.  Whether this method goes forward should be a matter of clear and open public discourse, though it seems a sensible compromise.  One thing does seem clear though:  expensive, partisan and bitter judicial elections will do nothing to promote public confidence in the quiet branch.  That's not the Minnesota way.

 

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