Morning Report

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Freedom Gas, Economic Warning Signs, and a Brewing Trademark Dispute

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INTELLECTUAL PROPERTY
There’s a trademark battle brewing between No-Li Brewhouse of Spokane, WA, which sells a beer called Born & Raised, and Goose Island Beer Company of Chicago, which is owned by Anheuser-Busch and sells a beer called Born + Raised (note the different punctuation): “For the moment, the sides appear to be engaged in a standoff, with Goose Island confident it has a right to the name. ‘We did our homework,’ Goose Island President Todd Ahsmann said.

“[No-Li’s John] Bryant, meanwhile, believes he has ‘a solid trademark’ while trying to avoid the
involvement of lawyers. ‘They have the lawyers and the clout,’ Bryant said. ‘We’re a small family owned business.’ … Informal agreements had previously worked for Bryant when it came to Born & Raised. It was in fact how he was able to use the name in the first place. No-Li applied for a federal trademark on Born & Raised IPA in 2012, but was opposed by a chain of Las Vegas bars, also called Born and Raised, that had already secured rights to the name in the alcohol and beverage category.

“No-Li could have fought for the trademark, but Bryant said he worked out a deal for what he described as a ‘first-use’ right to the name. ‘It was a lot of money we didn’t have as a small company,’ Bryant said. ‘We thought the more peaceful resolution was to just strike a compromise.’”

There’s a surprisingly large business behind the iconic smiley face: “Today, the Smiley Company charges labels low (Zara and H&M ) and high (Fendi and Moncler) and everywhere in between a per-use fee to slap the recognizable grin on garments and other merchandise of all sorts. Famously, Mr. Loufrani waged a years-long legal battle with Walmart over its ‘Smiley’ mascot before settling in 2011.

“‘We have now globally close to 300 licensees and the value of the smiley products selling globally is over $400 million,’ per year said Mr. Loufrani, adding that clothing generates 60 percent of its revenue. On its smiley sweatshirts, French fashion label Ami dressed the yellow symbol in a little red hat for extra cute points; Moncler has made bubble jackets with poppy smiley-face patches; and English accessories label Anya Hindmarch sells purses with smiley face cutouts. All are officially licensed deals.

“Not everyone forks over a usage payment. The Smiley Company holds the trademark only to the quintessential yellow-and-black version. So, although Grammy-winning singer Kacey Musgraves sells a tour T-shirt with a gigantic smiley on the back, she can forgo a licensing fee because hers is rainbow-colored.”

Did No-Li’s John Bryant make a mistake? Did Kacey Musgrave pull a fast one? Tune in to Mind Your Business today at 1:00p.m. ET on SiriusXM 132 when Loren’s guest will be Peter Cronk, an intellectual property attorney who had a hand in the startup that patented the ubiquitous Starbucks coffee cup sleeve. They’ll discuss the Born & Raised beer case and many others. Call 844-942-7866 during the show and tell us what you’ve learned about protecting your IP.

THE ECONOMY
There are some ominous warning signs flashing right now: “Global bond prices have soared, driving interest rates down sharply. Ten-year Treasury bonds are yielding only 2.26 percent as of Wednesday’s market close, down nearly a full percentage point since November 2018. The outlook for inflation in the years ahead is falling as well, as are the prices of oil and other commodities.

“Most significant, the fall in longer-term bond yields has not been matched by a fall in shorter-term rates. For example, a 30-day Treasury bill is yielding 2.35 percent—meaning you can earn more on your money tying it up for a month risk-free than you can tying it up for a full decade. This is not normal. It is called an inverted yield curve, and historically it has been viewed as a sign of a recession in the offing.”

TRADE
For US garlic growers fighting cheaper Chinese product, the trade war is actually good news. Christopher Ranch, the country’s largest garlic producer, is ramping up production to meet domestic needs. “[Since Chinese imports began in the 1990s] the number of American garlic growers has shrunk, from 12 commercial garlic farms in the 1990s to three today, according to Christopher, who estimates that 30 percent of garlic eaten in the U.S. is produced by China and 30 percent by his family’s company.

“‘This is a unique moment,’ said Ken Christopher, the executive vice president of the Gilroy [California] company, who said he was elated when the news [of the tariff] was announced. ‘The tariff really has a one-two punch in that it raises prices due to lack of supply,’ he said. ‘We anticipate that even more Chinese shippers will choose not to sell to the US, further increasing the likely price of that garlic.’”

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FOOD AND BEVERAGE
Food waste costs the US restaurant sector about $25 billion a year, and Farmhouse Tavern, an exclusive farm-to-table Toronto restaurant, uses a unique, dynamic pricing strategy to slash those costs. “That game begins around 5:00 p.m., as the horseshoe-shape restaurant begins to fill with diners ordering ‘buck a shuck,’ or 1 Canadian dollar ($0.74) oysters. The promotion is just one of eight hourly food and drink discounts designed to attract and retain customers on Sunday evenings. The goal is to sell out of perishable food and open bottles of wine so that Farmhouse can shut up shop with an empty refrigerator for the three consecutive days, when it is closed. Oh, and this weekly event is called F*** Mondays.

“Owner Darcy MacDonell learned to loathe waste while growing up on his family’s farm, implemented F*** Mondays upon opening Farmhouse in June 2012. ‘It became clear that we would likely always struggle to get diners in after a certain point on Sunday evenings,’ he says, with the restaurant located in a hip, but family-filled, neighborhood called The Junction. ‘I hate freezing stuff, [MacDonell said] and I hate throwing food out, so we needed to find a solution that would help us use up as much as we could before closing for three days.’”

HUMAN RESOURCES
With the labor market tight, it’s a good time to remember the open-hiring practices of Greyston Bakery, where there are no background checks, reference checks, drug tests or even job interviews: “Greyston was founded in 1982 by Bernie Glassman, a Buddhist Zen master from Brooklyn. He had opened a small bakery and cafe to support a community of Zen students. The mayor of Yonkers—which at the time claimed to have the highest rate of homelessness in America—invited Mr. Glassman to move there. Following the Buddhist principle of non-judgment, the bakery hired local residents who wanted work, no questions asked.

“Greyston Foundation, which owns the bakery, also runs community programs, such as supportive housing, job training and community gardens. The bakery (it’s actually a factory—there are no rolling pins here) supplies all the brownies for Ben and Jerry’s Chocolate Fudge Brownie ice cream. You can buy Greyston’s brownies in Whole Foods and Wegman’s, and Delta gives them out on flights. All 71 workers on the bakery production line got there through open hiring. The bakery has been profitable since 2009.”

SHIPPING
Railroads such as Norfolk Southern and Union Pacific are becoming more efficient, but they’re wiping out the profits of smaller shippers: “Railroads are giving customers only 24 hours to return empty railcars—half the grace period they used to give—and after that are charging a ‘demurrage’ fee of $150 a day. The previous 48-hour window allowed shippers to earn credits by returning cars early, and then use the credits to offset fees when they had to hold onto a car for weekends or holidays. …

“Harry Shea said his lumber distributor, Shea BrothersLumber Handling Inc. in Delanco, NJ, hadn’t accumulated any significant demurrage fees over the past three decades. Last year, the company was hit with about $115,000 in fees by CSX and $33,000 by Norfolk Southern, erasing its profit. Mr. Shea said the company unloads lumber shipments as fast as it always has, emptying nine railcars a day, but a quirk in the handoff from the railroad to his facility often means he starts paying a fee before he even gets the railcar. …

“Mr. Shea said his company has started to offset the fees, which hit nearly $54,000 in the first quarter of 2019, by charging its customers $225 per car starting in February. But that caused its third-largest customer to sever the relationship. ‘Our customers are not happy,’ he said.”

STARTUP
Data exchange tech startups offer to pay you for your personal data, but that promise is flimsy: “Billing themselves as disruptors of a top-heavy and exploitative industry, these companies promise to build platforms where we can collect, store, and ultimately sell our browser histories, Fitbit analytics, bank statements, Instagram posts, Spotify habits, and all the other data points that drop from us like skin cells and hair follicles as we go about our lives. … In return, you’ll get some crypto tokens that might be worth something one day if enough of us decide to sell access to our lives. That’s because the data exchange market doesn’t actually exist yet.”

OXFORD STRATEGIC ADVISORY DEAL OF THE DAY  
Pantheon, a web services company has acquired Staging Pilot, a company that uses AI to keep websites up to date. “Pantheon customers are spending days or even weeks making sure their updates are safe, Koenig [Pantheon co-founder] said, so the new acquisition hopefully targets that pain point for its customers.”

M&A
Fire & Flower Holdings Corp., an independent licensed adult-use cannabis retailer, has acquired 2103430 Alberta Ltd., the developer of a proposed cannabis retail store in Banff, Alberta for $1 million in cash and $2.5 million in stock.

Twistlock Inc., a provider of docker container security solutions, has announced to be acquired by Palo Alto Networks, Inc. for approximately $410 million.

VENTURE CAPITAL
Roger, a developer of an automatic bill payment platform raised $7.35 million in a Series A Round.

AttackIQ a developer of a security effectiveness platform raised $17.6 million in a Series B Round.

PARENTING 
Instead of a chore chart on the fridge, parents are using allowance-tracking apps to teach their kids the value of money. “Greenlight, like some other allowance apps, links to parents’ bank accounts so that the payout can be seamless. Parents can encourage saving by paying interest on the money that isn’t spent immediately—interest out of the parents’ own pockets, of course. The service even issues debit cards for the kids. (The money is held by Greenlight’s banking partner and the funds are federally insured.) … Some parents might worry that relying on apps to get kids to do chores only encourages them to be on their phones more. But parents who have opted for this approach argue that they are meeting their kids where they are and that it takes the parental nagging out of the equation.”  

ENERGY
The US Department of Energy has rebranded fossil fuels/gas exports as “molecules of freedom” and “freedom gas”: “The move was a clear indication of US commitment to promoting clean energy, the statement said. But the rebranding comes amid a Trump administration push to roll back climate change legislation introduced by Mr. Trump’s predecessor, Barack Obama, which targeted vehicle emissions.”

And that’s what’s ahead.

Please send comments and suggestions to lfeldman@oxfordcenter.com andmattg@oxfordcenter.com

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