Dragons' Den Makes Business in Court

I was fascinated by this week’s episode of Dragons’ Den on CBC and the usual two deals that were struck. No, the first deal wasn’t particularly unusual, as there was a solid business with sales that was looking to expand. The valuation was fair, and the royalty-based deal was fairly simple.

Patents and Money

Patents and Money

What was surprising was the second deal, which was not typical of the show, and the reactions of the various people involved was not surprising.

Richard Abramowicz of Yo Mama Gear came on the show asking for $3,300,000 for 30% of his business – in US dollars. His business model, however, had little to do with clothing or equipment (although that would turn out to be a part of the model).

Richard owned the patents and derivatives on the phrase “Yo Mama”, held here in Canada since 1988 and in the US since 1998. That means that anyone who uses the phrase is violating his patent – for example, Urban Outfitters, Zazzle, Cafe Press, and American Apparel. (His claims have not been verified, but those companies were the ones he mentioned on the show.) His business plan is to sue them for patent infringement.

Naturally, Arlene Dickinson was disgusted by the business model, and would have no part of it. Brett Wilson wanted no part of it, and neither did Jim Treliving.

Kevin O’Leary, however, loved the idea. Robert Herjavec talked about the technology sector, where this is a viable business model, and can be quite successful. (As an example, look at i4i and it’s case against Microsoft.)

The two of them decided to take the deal, but on very different terms. Kevin proposed that he pay $1.00 for 51% of the company, which would give him the ability to file suits against whoever violated the patents. Should those suits be successful, he would pay Richard from the proceeds of the case the balance owing: $2,999,999 US dollars.

This was an unusual deal, as the money is not made from the ability to sell or market a product or service, but from the ability to protect a patent – and in this case, the patent of a phrase that many people have been using for decades, unaware that it had been patented, or even patentable.