Don’t Do This It Doesn’t Work

My favorite session at the old Mac-Hack computer programming conventions I used to go to was called “Don’t Do This It Doesn’t Work”. It was a round-table for computer programmers running small businesses to find out what does not work in business.

In the cases below, every case I describe has wound up with me talking to a lawyer.

Each time (except in the patent-trolling case, since there is no way you can learn or benefit from those), the lawyer has told me the same thing: “You have to feel the pain of these experiences so you will learn from them and not repeat them!”

Well you know what? We should NOT all have to learn only from terrible experiences!

We should tell EVERYONE what happened, so OTHERS do not have to learn the HARD WAY!

This is an idea on which aviation safety is based, and the same should apply in business!

So, here are a few terrible business experiences I have had, and ways to help you avoid similar pit-falls.

I list them in date-order.

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JetStream Catalog, run by Ron Weiner:

When I first got started with X-Plane, the internet was not quite established yet, so I sold X-Plane on DVD through a mail-order catalog called the JetStream catalog, run by a guy named Ron Weiner. Their terms (with me, anyway) were that they would order many copes of X-Plane from me, and had something like 90 days to pay for them. 90 days would go by, and often no check would arrive. But in that time-frame they would have placed more orders! This way, they managed to run up huge debts myself and many other people that supplied them with inventory to sell. As well as running up huge debts with their suppliers by receiving inventory without paying for it, they would charge customers for inventory that was never delivered to the customers! When the noose finally started to close, with the vendors refusing to send in more inventory, and the customers outraged at not receiving the goods they paid for, Ron shut down the business and fled the scene back to Israel… leaving the vendors and customers holding bad debts.

-The lesson here is to try to do the work yourself to run your business, and not push critical things off onto other companies!

-As well, if you MUST count on someone else for distribution, then be sure that you have pretty short payment terms, and cut them off if they don’t pay for what they got! Don’t let them drag you along forever.

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Xicat:

Xicat was one of the first companies to distribute X-Plane on retail shelves.
My contract with them was that they would pay me some number of dollars for each copy they sold. (This is called a “royalty”).
After some period of time, when Xicat was far behind in royalty payments, and all of my requests for payment were rebuffed, I eventually told them that I would sue them for past-due payments if I had to. At that point, Reto Bodmer, (President of Xicat) told me that he would sue me if I sued him, as was their corporate policy. As well, he would (in his words) “Bury you in a shit-storm of TROs and put you out of business”. A TRO is a temporary restraining order that one company might be able to put on another to prevent them from selling goods or services, such as X-Plane at www.X-Plane.com. True to his word, Xicat did sue me when my lawyer started to ask them for payments… but for some strange reason, Reto agreed to settle and pay my overdue royalties right after my deposition, but about 5 minutes before his deposition was scheduled to start! What a coincidence.

-The lesson here is to try to do the work yourself to run your business, and not push critical things off onto other companies!

-As well, try to never set up your business so that someone ELSE holds the keys to you ever being paid… you will be at their mercy for your livelihood! This is very dangerous!

-Try not to be intimidated by someone threatening to put you out of business with Temporary Restraining Orders… any judge should quickly be able to tell what is going on.

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Northern Leasing:

Around 1995, I signed a lease with a company called Northern Leasing to lease credit card equipment so that I could charge customers credit cards for buying X-Plane if they gave me their credit card number over the phone.

They asked for my bank account info to withdraw the monthly $49.95 fee.
I gave it to them.

Of course the internet eventually made this equipment obsolete, so well AFTER the four-year lease had expired and been paid by me, I asked them if I could send the equipment back. They said no, but I sent it back anyway and told them to cancel my least since it’s term had long ago expired.

At this point Northern Leasing told me that it was a “non-cancellable lease”, and that they would not stop withdrawing money from my bank account. Since the lease was a 4-year term, and many more than 4 years had elapsed, I told them that they were not going to get any more money from me. I can still remember the exact voice of the person on the other end of the phone, slyly saying: “We’ll just SEE about that.”

I hung up and called my bank and told them to put a block on any further withdrawals from Northern Leasing.

I got back to work on X-Plane. At the end of the year, as I audited my bank account to prepare my taxes, I saw something shocking: Monthly withdrawals by a company named “Northern Leasing INC”, “Northern Leasing LLC”, and other similar names. The first withdrawals were first for less than a dollar, then a little bit more each month, and ultimately one withdrawal for about five HUNDRED dollars. Infuriated, I called my bank and asked them why the withdrawals were not blocked. Their answer: “Withdrawal blocks only apply to a certain name, and a certain amount. When they changed their name slightly, and changed to random withdrawal amounts, that went around the block and let them withdraw from your account.”

In the course of my lawsuit against Northern Leasing, I did meet the lawyer for Northern Leasing, a man named Joel Sussman, who I found repulsive.

If you doubt anything that I say, simply click below:

http://www.worldlawdirect.com/forum/attorneys-legal-ethics/74143-sleazy-scamming-lawyer-joseph-i-sussman.html
http://thedirty.com/dirty-business/scam-alert-northern-leasing-systems-inc-aka-mbf-leasing-llc-is-a-scam/
http://www.avvo.com/legal-answers/i-need-help-with-a-suit-filed-by-northern-leasing–1735015.html

So, a few lessons are clear:

-Never give you BANK ACCOUNT info for any of the regular monthly-charge services you get… give them your CREDIT CARD number instead! Credit card charges can be disputed! Bank withdrawals are FINAL!

-Never assume that a bank withdrawal block will work! The person withdrawing money need only change their name slightly, or withdraw different amounts, to get around the block and still remove money from your account! That is exactly what Northern Leasing did!

-As for doing business with Northern Leasing, click here:
http://www.ag.ny.gov/press-release/ag-schneiderman-reaches-settlement-manhattan-equipment-leasing-company-over-11m-scheme

It is a gross injustice that the people running this business are allowed to hide behind a corporate name.

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The Verge Fund:

Some years ago, I hired a company called Vertical Power (owned, as far as I could tell, by a company called the Verge Fund) to make a product called the VP-400. The job was contracted to be done for a certain amount of time and money to be paid by me.

The contract specified that each of us owned the part of the project that we created, the idea being that each of us would have equal skin in the game, and incentive to get the job done, and taken to market.

I did NOT imagine that Vertical Power would fall years behind schedule, go more than 100% over budget, create only an incomplete and malfunctioning system, sell the incomplete project (but NOT the contract to COMPLETE it!) to another company called Astronics, pocket the money from the sale for itself and/or its investors, rename themselves to “Power-Down Albuquerque”, which contained the CONTRACT to finish the job, but not the ASSETS to finish the job, issue no refund to me, and shut down operations, leaving me with nothing but a malfunctioning, incomplete unit that was not fit for use in a manned airplane, and over a million dollars in payments that I had made to them with no return of that investment to me when they sold off the project to Astronics.

But, that is what they did.

And then Astronics, upon receiving the incomplete VP-400 project, shut it down.
(Astronics owns VerticalPower.com, but claims to have no obligation to make good on the Vertical Power contract with me, telling me that they purchased only the ASSETS of Vertical Power, NOT the obligation to finish the job).

For me, the worst moment was on the Eve of the sale of Vertical Power to Astronics, when the VP-400 was in my airplane, malfunctioning and incomplete to the point that it could not possibly be safely used, and the president of Vertical Power called me on the phone and said: “I am just telling you what the lawyers are going to tell you tomorrow: If you do not sign a statement saying that we have completed the job, then the Verge Fund will sue you for tortious interference, and take your car and your house.” (Trust me: When you hear that, your mind quickly goes to your wife and 2-year old daughter that live there!)

They also wanted a $50,000 “completion fee”.

Winding up with no useable product, but a threat to take my house and car if I did not sign a statement SAYING that the job was done… THAT was a phone call I will never forget.

Some lesson here are obvious:

-Make sure that the contract that you sign makes it clear that you OWN what you PAY for. My contract with Vertical Power specified that we each owned what we created, which is what allowed them to legally sell off the project.

-Another lesson (you might notice a recurring theme here!) is to do the job yourself, or with a close-in team of employees… don’t hire a sub-contractor whose goals may be at odds with your own!

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Uniloc:

Just Google “Patent Trolls”.

And to learn about what Uniloc is (currently, as of Jan 30, 2015) doing, click here:

Uniloc Lawsuit

If you doubt anything that I say, click here:

http://arstechnica.com/tech-policy/2013/03/you-cant-patent-simple-math-judge-tells-patent-troll-uniloc/

Unfortunately, there is actually no way to avoid patent-trolls, other than shutting down your business.
Patent Trolls pop out of nowhere, dropping a tremendously expensive lawsuit in your lap, even though you have never even heard of them before, or ever seen a single word of any patent they have ever written. All they have to do is find a non-sensical patent (the world is over-flowing with those) and decide to sue you. There is no practice that you can adopt to prevent that.
Frivolous litigation costs billions of dollars, not only to the businesses being frivolously sued, but to the taxpayers that pay to move these hordes of ridiculous cases through federal court. We would be better off with no patent system at all than what we have now.

Put simply:
How should we make money in this Country? By doing the work to PROVIDE goods and services, or by SUING those that do instead?

Put simply:
The United States Patent Office will work properly when the people in the United States Patent Office know every invention that anyone has ever made, ever.
How else could they grant patents only to the original inventors?
So, is United States Patent Office smart enough to only grant patents to the original inventors?
Well, here is a patent for swinging on a swing sideways, approved by the United States Patent Office in the year 2000. According to the United States Patent Office, nobody had ever thought of this before 2000. THIS is the level of competence our Patent Office ACTUALLY operates at. The patent shown below is not a joke.



So the above is a real patent. This is the level of idiocy that the United States Patent Office spews in it’s gross incompetence… and the cost to innocent business that are sued for so-called “patent infringement”, and to the taxpayers that pay to run all this non-sense through the Federal Courts is in the billions of dollars per year.