The Anthill Shell Game Gambit

By Mike / On / In Appsterdam

During panel discussions between App Makers and patent attorneys Michael McCoy (US) and Paul Reeskamp (NL), we discussed business structures to erect legal bulkheads to limit exposure to extortion or other threats. The construct we came up with is to have an Amsterdam- or offshore-based licensing company that owns the IP produced by the App Maker, and some number of operating companies that license and sell that IP in different markets.

The US accounts for approximately 25% of the app market and 100% of the extortion market. One advantage of living in Appsterdam is that you are generally out of reach of the US, unless you do business in the US. You can do business in the US while limiting your exposure by having your Dutch company deal with non-US marketing and sales, and a US company dealing exclusively with the US market.

One advantage of doing business in the US is the trivial formation of limited liability companies. That means you can have your US company spin off new US companies for each successful product. You can even have separate companies for every platform. The more you bifurcate your enterprise, the more you ensure that if one part falls under extortion, the rest is protected.

In its long-term role as the legal center for App Makers, the Appsterdam Legal Foundation is exploring ways to make setting up such a structure as painless as possible, even for people who are not citizens of the United States.

It is also possible to effectively eliminate exposure to the US by simply not servicing the US market at all, as some European companies have done. Even though the major platform providers are based in the US, non-US companies making non-US products for non-US markets are sufficiently jurisdictionally out of reach as to not be worth the bother.

Of course, if it’s all the same, you will probably find the US market too lucrative to ignore when the only risk is losing that market. Still, it may be a good idea for non-US companies to exclude the US market from early trials and launch. If and when the product becomes successful, it will be worth the effort to enter the US market.

Tune in tomorrow when we shall endeavor to create an App Maker’s Guide to Surviving Extortion.