COMMENTARY | COLUMNISTS | PHIL BAKER

Sound business advice?

Note: This past week the U.S. recording industry filed 261 lawsuits against people it claims have illegally downloaded and distributed copyrighted music, stepping up its attack against online music piracy. The Recording Industry Association of America said the civil suits were filed against individuals, some as young as 12, who had each distributed an average of more than 1,000 copyrighted files.

Is your business suffering from a sales slump? Have you not been able to figure out how to adjust your business to take advantage of online competition and all of the new technology? Don't despair. There is an answer. Just sue!

Sue who? Well, for starters, go sue your smaller competitors. They can't fight back. Sue for what? Anything. Make it up. You don't really need a sound reason. Pick anything to sue for. Maybe your competitor disparaged you in an ad, or maybe he is selling a product that looks too similar to yours (like the same color). You know that our court system will take years to resolve a dispute, whether there is anything of merit or not.

And here is some advice. Before suing, get patents -- for anything technical. The Patent Office issues them for just about anything, like for using one click of a mouse to order a book or a patent for someone else's DNA. Having technical patents are really good for suing because many judges do not understand the technology. That means they need to take a lot of time to study the issues. And that costs your competitor more money to keep his lawyers on the case, and the need to hire technology consultants to explain things. Meanwhile, you cause your small competitor to spend money not budgeted that would otherwise be used for improving his product. And you take his attention away from running his business, particularly when you get to the discovery phase, and the courts require him to disclose all e-mail and other records. That can tie up the entire company for weeks, sorting through personal e-mail and embarrassing downloads from business e-mail. And your competitors won't be able to get new funding during this time -- no one wants to invest in a company being sued.

Suing is America's latest sport. It's even a profit center in some companies. And it can keep your stock price up. It keeps the economy going by keeping everyone much busier than they would otherwise be during these slow times. And it's not the kind of work that can be done by sending it overseas like so many companies are doing today. It's something that can best be done by Americans. In fact, it is patriotic to sue! Once the suit is settled, it brings in more taxes. Suing even helps the local economy and the little guys. It keeps the parking lots around the courthouses full and gives citizens the opportunity to contribute their time to their community -- jury duty.

Look who's suing whom these days. Xerox (NYSE: XRX) is suing Palm (Nasdaq: PALM). A great strategy. Xerox gets a patent for something it never uses, and then sues when somebody else makes it work. Microsoft (Nasdaq: MSFT) is suing little Lindows for naming their windows-like product Lindows. Microsoft thinks the consumer will be confused. You're no one if you are not suing someone. And on it goes.

But what if you are part of a large, monopolistic industry and have no competition to sue? Then do what the music industry is doing. Sue your customers! After all, if your customers refuse to pay outlandish prices, you can sue them for not supporting your industry. You say suing your customers may make them angry and no longer be a customer? Nah, not when you have a monopoly. By suing those 12-year olds and their families, you may force them to come back and be loyal customers again. And you will help the family unite. The parents may even take more interest in what their kids are doing on their computers all day.

The music industry says the real reason for suing the downloaders is because they are stealing music by exchanging it with others on the Internet. That's what the video industry said too, when the first VCRs were being used.

Most downloaders just want to be able to get their music instantly like almost everything else today. No one wants to get in a car and drive to the record store and then search for the CD in a pile of bins. And then when you finally find it somewhere in the store you pay $20 to get just a couple of good songs. But the record industry says the drop in sales is because of sharing over the Internet? Did they ever think it was because the music is getting worse? Or because they haven't provided an alternative to buying music instantly without all the restrictions? And did they ever think that some of the new technology could be used to boost sales? With all of the ways to store and play back digital music, you might like to have many copies of a song, and even pay for them. And with the new technology, they could sell a song by itself and not force its customers to buy an entire CD. Or they could sell it with a video or images of the musical group.

Customers might even pay a little extra not to get the junk that's used for fillers on an album. They certainly don't want to pay for the same song they already have on another album by the same artist. (Selling the same product multiple times is a good way to keep margins high.) Even restaurants give you a choice of appetizer and dessert, offer an a la carte menu, and do not force you to take it all or nothing.

In industries where there is a fear of losing high margins and big perks, like the music industry, imagination is in short supply. It's hard to innovate when you're scared. The last big innovation in this industry was the CD, 20 years ago, and that came from the Japanese and the Dutch. So I say to the music industry: Don't do what other companies do, namely, reinvent themselves using new technology to grow the business. Fight it and just sue your customers. It's good for America and it's good for the economy!

Disclaimer: Any resemblance to reality in this column is purely coincidental. So if you don't like it, just sue!


Baker has developed and marketed consumer and computer products for Polaroid, Apple, Seiko and others. He is the holder of 30 patents and was named San Diego's Ernst & Young Consumer Products Entrepreneur of the Year in 2000. He can be reached at phil.baker@sddt.com.

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