Conde Nast will let Reddit spin off as a separate organization with hopes that the greater autonomy will increase Reddit’s growth. Conde will retain ownership as Reddit seeks to first increase its staff, starting with a CEO that will let Reddit reach its “full, unbridled potential,” according to a post announcing the change on Reddit’s company blog. READ MORE
On Wednesday, California governor Jerry Brown signed a law that requires online retailers to collect sales tax from CA residents even if the companies have no brick-and-mortar presence in the state. It’s another example of the so-called “Amazon Tax,” which circumvents the brick-and-mortar statute of federal law by declaring CA-based affiliates–say, a personal blog linking out to Amazon or Drugstore.com products for a small slice of any sale action–as a physical presence. READ MORE
Like twin Energizer Bunnies of litigation, Cameron and Tyler Winklevoss keep going, and going, and going. Just one day after it was announced that the pair and Divya Narandra would not take their fight with Facebook to the Supreme Court (instead abiding by the ruling of the 9th Circuit Court of Appeals, which upholds the trio’s original agreement with Mark Zuckerberg), all three told a federal court in Massachusetts that they will go after separate claims alleging Facebook suppressed evidence during the original round of settlement talks, in 2008. READ MORE
While it might seem innocuous that Groupon is offering a deal on seafood in Massachusetts, it’s actually the first time the daily deal giant is letting shoppers use supermarket loyalty cards to conduct the transaction, writes Advertising Age’s Jack Neff. Groupon has partnered with two Boston marketing and analytics firms on the test with grocer Big Y, which is offering the deal. READ MORE
A suit filed in a Massachusetts court by Skyhook Wireless is ostensibly a battle with Google over location-based services. But the ramifications are far greater, writes New York Times’s Steve Lohr. In the suit, Skyhook, a pioneer in location-based services for mobile phones is alleging that Google’s assertion of “compatibility compliance issues” for handset makers is a thinly veiled attempt to squelch competition in the space. READ MORE
The recession has pummeled small businesses’ IT budgets, but that’s no excuse to slack off on electronic privacy and data protection safeguards. In fact, hard times make keeping an electronic eye on privacy and IT security critical as economic factors are contributing to more frequent data breaches from outsiders and information theft from just laid-off employees and other company insiders, according to attorney Charles Kennedy, a privacy and data protection expert. In 2008, reports of data breaches at U.S. companies jumped 47 percent to 656, according to the Identity Theft Resource Center, a San Diego nonprofit. Reports of laid-off employees taking company information with them are also on the rise says Kennedy, with the Washington D.C. office of Morrison Foerster. Over half of 945 laid-off workers responding to a recent poll by Ponemon Institute, a Traverse City, Mich., privacy researcher, admitted taking company data when they quit because they felt entitled to it, thought it would help in their new job or didn’t realize it was stealing. With breaches on the rise, small businesses simply can’t use the bad economy to rationalize trimming their electronic data protection program budgets, Kennedy says. Another reason companies can’t let down their guard: state and federal regulators continue to pass stringent electronic data protection rules. One of the latest is the Federal Trade Commission’s Red Flags Rule, which takes effect Aug. 1 and requires financial institutions, health care providers and loan processors to create identity theft prevention programs. The Obama Administration’s economic stimulus bill included a stepped up health-care records security breach notification requirement that takes effect in February 2010. In addition, states such as Massachusetts and Nevada have passed laws requiring companies to use encryption and put in other controls over consumers’ personal information. Regulations aside, following stringent privacy and security protocols is good for business. “If you have good privacy practices you can make it a feature of your advertising,” if you don’t exaggerate claims, Kennedy says. “When the other guy has a breach and you don’t, that’s good for you. Security is an edge you can’t afford to ignore.” Doing the same or more with less Still, no one expects small businesses to spend half their revenue on the latest firewalls and other data protections. Companies have to maximize whatever manpower and financial resources they’ve got. Kennedy and Alex Puertas, a program development manager at Iron Mountain, the data storage and protection vendor, recommend the following: Squeeze every penny from existing privacy protections. If you’ve already purchased encryption, intrusion protection and other security technologies, make sure you’re using everything you’ve paid for. “Some data breaches occur because companies didn’t do things they should, like update passwords and firewalls. They’d already paid for them, they just didn’t use them,” Kennedy says. Eliminate redundancies and shift resources. Cut costs by eliminating some of the overlapping functions in the security technologies you use. Likewise, reallocate funds from less critical IT and compliance programs to privacy and security, Kennedy says. Create written policies and make sure employees know what they are. Written policies can stop problems from happening in the first place and the more trouble you avoid, the less money you have to spend mopping up after the fact. Policies should cover electronic records management – what data is saved, who saves it, how often, and by what method. Policies should also cover employees’ use of portable electronics, updates on new regulations and what to do to limit employees’ access to sensitive data if there’s a layoff. Lean on outside contractors. Small businesses might not have the financial resources to maintain an in-house chief privacy officer or compliance department. If that’s the case, make sure you’re working with lawyers, CPAs, or other consultants who can provide you with reliable guidance and technology on privacy and security matters. “I deal with small, medium and big companies and I don’t know of any that can handle all phases of this alone,” Kennedy says. Pick an insider as your privacy policy point person. Even if you use a third party to run privacy programs, choose a company insider as a liaison to ensure policies are being followed. That person should also head up formal audits every year or two so programs can be altered to adhere to new laws or industry regulations. Tap into industry groups for cheap assistance. Trade associations are great resources for timely information on privacy regulations. In some cases, you don’t even need to be a member to take advantage of reference material that’s available for free on a group’s Website, Kennedy says. SIDEBAR: Electronic Privacy and Security Policies Resources Here are additional resources for creating and electronic privacy and IT security practices: Fighting Fraud with the Red Flags Rule: A How-To Guide for Business — A 17-page guide from the FTC on its new identity theft prevention requirements that includes step-by-step instructions businesses can use to create their own programs. The Identity Theft Resource Center — Theft prevention information for businesses and consumers, plus updates and statistics on data breaches at U.S. companies. HIPAA health-care records data breach notification — Health and Human Services Department document spelling out details of health-care privacy protections included in the economic stimulus bill that take effect in 2010. Iron Mountain Knowledge Center — Free white papers, webcasts, and other materials on electronic privacy protection and security issues.
KaBloom is a Massachusetts-based online florist in business since 1998 that has a patented technique for shipping fresh-cut flowers in water overnight. The company found that sales increased dramatically after switching to a new online payment platform that allowed the firm to better communicate with customers and allowed customers to more easily process payments, CEO David Hartstein tells IncTechnology.com. Elizabeth Wasserman: You have a patented system for sending fresh flowers in water to customers over night. How did that impact your technology decisions? David Hartstein: We’ve been in business since 1998 and our business has gone through different cycles. Today we have over 30 stores but our business model right now is focused on mainly selling online at KaBloom.com. The majority of our stores are in Massachusetts. We also have stores in Chicago and Florida. But we deliver nationally. Fresh cut flowers that are delivered over night are usually delivered by FedEx without water. When you go through the rigorous distribution and logistics within FedEx, you can not pack flowers in water. Think about taking a bottle of water and putting stems inside. If this ends up on its side or upside down, the water will be all over the place. We have a patented technique where we are the only one in the world that can ship fresh flowers in water via FedEx. Our flowers can be in any position, upside down and sideways, and no water will spill. When we started offering this to customers, we needed a new platform, a new way to communicate with our customer and tell them about what we do, what we have, and why we are different. Wasserman: What did you decide to do? Hartstein: We decided to implement a new payment platform called whizPay mainly because it provides reliability and ease of use. It provides a very easy customer checkout process. The back office that we have with it has very rich functions. It assists us with product description, with the content, with our stores and our stores managing platforms. Each store has the ability to manage their orders. It’s a central platform that they can access from different locations. They get a notification when an order comes in for them. They have the ability to log in to the main platform, communicate with the customer, change the order, change the address. Without having to have an administrator do it for them. Wasserman: At the same time, does it protect your data? Hartstein: It’s all secure. There is information that can only be managed by the administration and not by each store. They can not delete a customer’s information. There are other benefits, too. For example, say we have a store in Virginia. That store knows their customer base and knows what the customer likes. They have the ability to display the designs that their customer likes so that when the customer orders a certain design, the system knows to go to that store to deliver that product. We have the ability to say that product X can only be delivered from Y location. Wasserman: What it easy to implement? Hartstein: It was easy — as far as anything in technology is easy. We launched Sept. 1, 2008 and we never had to during that process shut our site down and bring other alternatives online. There are always hiccups but we’ve never had issues. Wasserman: What results have you seen? Hartstein: Since February of this year, we have seen an increase of about 50 percent in orders through the new platform. That is quite astonishing in this market. There are two reasons for this. First, we have a product we sell that no one else sells and that is that we are the only one can deliver flowers in water from coast to coast over night. Second, our management function within our platform allows us to communicate with our customers in a much easier way.
WeNeedaVacation.com is a Web-based travel business started in 1997 in Wellesley, Mass. to help match vacationers with rental properties in resort locations. Founders Joan and Jeff Talmadge now have seven employees and list more than 3,500 properties on Cape Cod, Martha’s Vineyard, Nantucket, and in Florida. Jeff Talmadge tells how digital video is adding a new dimension to his business. Elizabeth Wasserman: Tell me about your business. Jeff Talmadge: We advertise private homes or condominiums on behalf of homeowners on the Cape and Islands off the coast of Massachusetts and Florida They pay us to advertise. We use the classified advertising model. Our goal is to find as many vacationers to book those homes as possible. Our success is directly related to how well we can attract vacationers to our site versus other competitive sites. Their interest is what ultimately makes the homeowners happy because they get the booking. Wasserman: Why did you decide to deploy video on your site? Talmadge: It was a very exciting and difficult and yet exhilarating decision. Since beginning of our site 10 years ago, we’ve prided ourselves on being able to take the latest technology and provide it to homeowners and vacationers. We’re always looking for something that gives us the technological edge. Technological edge, in turn, gives us an edge in capability and performance. Video came about due to an awareness that the whole social networking world was exploding in front of our eyes. We wanted to be a part of that. Last year, we did a photo contest to dip our toe in that water. We had thought about video in the past. We had been approached by the classic virtual tour companies. It sounded too expensive. Didn’t see how anybody could make any money at it. We just put it on the back burner. Then we got a call from Fliqz and the rest is history. They really made it so easy and affordable. Wasserman: What were some of the challenges? Talmadge: We had a really tricky problem figuring out how to make it financially sensible to us. We wanted to be able to charge for it. And yet charging too much would be kind of like shooting ourselves in the foot. We felt in essence there were benefits to our two main constituents. Vacationers more and more need a vacation with the stresses of life. Our name is poetic. The more information they have about a property before they go, the more confident they are that they’re making the right choice. With over 3,000 homes on the Cape and Islands alone, there is a dazzling array of homes. Which is the best home for me and my family and my set of friends? Over the years, we’ve included the addition of many pictures, snapshots, still photography and that’s been wonderfully helpful. We even have a photography service to go out to a home and really make it sparkle. But there’s nothing like video to make a vacationer feel like they’re there. It’s the next best thing driving to the home. Wasserman: Do homeowners shoot their own video? How does it work? Talmadge: That again was a really crucial piece of puzzle. If we had to do it all, it would slow things down too much. Homeowners are absolutely able and willing to do it. We also have services where we can go out and shoot them. The crucial strategic decision here is: Do we believe with some help from us that our homeowners can do this easily? If they can’t, why bother. We’ll get five, 10, 15, 20 videos shot by us and that’s it. Unfortunately, we decided to start offering this in August. It’s been a bit of a tough sell over the winter. So far we have had a few submittals from homeowners, but the weather was a bit of a showstopper. Wasserman: How difficult was this to set up? Talmadge: It certainly took a few days of work. As programming tasks go, it was a piece of cake. Our issues were not at all with the Fliqz platform. The problems were on our end: how do we price it, how do we do it? It’s both a software and a service. They provide a set of components that enable you to upload video to their site and then play that video on your own site. We wanted that to be as easy as possible for our homeowners — we didn’t want them to have to upload videos directly. So we had to do some programming of our own to get the videos from them to us and then we upload them. What they provide is an upload capability that is programmable. We can do it automatically through API calls, through Web service calls to them. Then once the video is up and encoded, they return their unique identifier to us, and we stick that in our database. We then rebuild our listing as the homeowner submitted it and we add a button that says “Play this video.” The video plays in our little custom player.
One morning last December, I dropped into my favorite coffee shop and found myself about 12th in line for some much-needed caffeine. The guy in front of me was on his cell phone, his voice booming all over the crowded café as he ordered last-minute gifts. By the time he reached the counter, he’d clearly recited his name, full address, credit card number and the card’s security verification code — twice. After paying for his order, he launched into a third call, sharing the same details. It’s hard to say whether his credit-card account was in more jeopardy from some distant wireless eavesdropper — or from the laptop-equipped customers at the next table who might well have been quietly typing down the information as he repeated it. Either way, it illustrates a hard fact about cell phone security: Your safest strategy is to assume that you have unwanted listeners. Chances are that you don’t. But when it comes to confidential information that’s transmitted across radio frequencies, as cell phone calls are, your best bet is to conduct yourself as if you do. Caution is especially important if you find yourself using an analog signal; that’s when someone using a scanner can pick up your call. Digital signals are scrambled, but security experts say it’s still possible that hackers armed with sophisticated equipment could intercept and decode them. And, of course, someone who can overhear your half of the conversation before it enters the phone — as in the coffee-shop case — doesn’t need any special devices to capture some highly valuable information. With cell phone use at an all-time high — manufacturers shipped more than 1 billion handsets worldwide in 2006, up from 833 million in 2005, according to Framingham, Mass.-based IDC Research — related crime is likely to keep growing as well. Following are three other cell phone security threats, along with advice for preventing them: Equipment loss Many people save sensitive information — account numbers, passwords, customer billing information, emails on confidential matters — on their cell phones. Having those details at your fingertips is certainly convenient, but the device is misplaced or swiped, whoever winds up with it might know far more about you than you’d like. If you must keep such data on the phone — if, for instance, it doubles as your electronic address book — at least protect it by using the password feature available on most contemporary models. You should also set the phone to automatically lock the phone after a certain period of inactivity. Those measures won’t foil professional hackers, but they may keep the casually curious from accessing the details of your life. As an alternative, you might consider keeping especially sensitive information on a removable memory card, if your phone is equipped to hold one — and if you can train yourself to remove the card and store it in a safe place when you’re not actively using it. Phone upgrades When you buy new phones, remember that you can’t be too careful about wiping the data off your old ones. Consider the results of a recent experiment by Trust Digital, a McLean, Va.-based maker of security software for mobile devices. In mid-2006, the company purchased 10 used cell phones in eBay auctions. While the phones’ previous owners apparently believed they’d deleted all their information, technicians recovered plenty of potentially damaging data from all but one device. The information retrieved — 27,000 pages of it — ranged from passwords to confidential customer records to emails about pending business deals to text messages chronicling a love affair. The problem: On many phones, permanently purging data requires a series of complicated steps so that customers don’t erase information accidentally. So even if you’ve deleted those your records and the phone’s memory seems empty, someone with the right software may be able to resurrect data once stored there. The solution: If you’ve got telecom specialists on staff, ask them to thoroughly clean all phones before you sell, donate or toss them. If not, call or visit your carrier so that their technicians can do the job for you. Or you may want to follow Trust Digital CEO Nick Magliato’s half-serious advice for making sure an old phone doesn’t give up your secrets: “Run over it in a car.” Hackers As socialite Paris Hilton learned in a particularly high-profile case, a serious thief doesn’t need the actual phone to swipe confidential information. In early 2005, a hacker broke into a major cell-phone carrier’s systems, accessed Hilton’s account, stole racy photos and private celebrity phone numbers and posted them on the Internet. (The culprit, a Massachusetts teenager, later pleaded guilty and was sentenced to juvenile detention and supervised release with — no surprise — no Internet access.) While most of us won’t individually attract our own personal hackers, it’s worth checking with your carrier to find out what, if any, data it’s capturing from your phone. If you find that everything you’ve keyed into the phone is also sitting in the company’s computer systems, you may want to rethink what you’re storing on the device. Bottom line: You need to determine acceptable-risk levels not only for yourself, but for your staff as well. Establish and enforce policies, especially about what information people store on their phones. After all, as with any other scenario involving corporate secrets, your security is only as good as the practices of your most careless employee.
In February 2001, Stephen Gass strode to the podium in a conference room at Caesars Palace in Las Vegas and began the video presentation for SawStop, his new invention. The 75 attendees watched the screen closely as a woodworker fed a sheet of plywood into a power-saw blade spinning at 4,000 rpm. Then a hot dog was placed in the path of the blade. Miraculously, the instant the blade made contact with the wiener, the saw shut down and the blade retracted. The dog escaped with only a small nick — substitute a finger and it’s the difference between a cut and an amputation. Gass had given the same dog-and-pony show a dozen times, mostly for woodworkers, contractors, and a few industry executives. But this audience was different. It consisted of lawyers for the Defense Research Industry, a trade group for attorneys representing the power-tool industry. SawStop could help prevent thousands of serious injuries caused by power tools each year, Gass believed — if the industry would license it. He returned to his seat thinking he had made his case. Then Dan Lanier, national coordinating counsel for Black & Decker, stepped to the podium. His topic: “Evidentiary Issues Relating to SawStop Technology for Power Saws.” Lanier spent the next 30 minutes discussing a hypothetical lawsuit — in which a plaintiff suing a power-saw manufacturer contended the saw was defective because it did not incorporate SawStop’s technology — and suggesting ways defense counsel might respond. Lanier recalls it as a rather dry exploration of legal issues. Gass heard something different. To his ears, Lanier’s message was this: If we all stick together and don’t license this product, the industry can argue that everybody rejected it so it obviously wasn’t viable, thereby limiting any legal liability the industry might face as a result of the new technology. (Lanier denies this was his point.) Gass was stunned. His tiny start-up, run by three guys out of a barn in Wilsonville, Oreg., had captured the attention of the entire power-tool industry. For months, he had been negotiating with major players such as Ryobi, Delta, Black & Decker, Emerson, and Craftsman about licensing his invention. Instead, they seemed intent on trying to make him and his product go away. Some 32,000 Americans are rushed to emergency rooms with table-saw-related injuries each year, according to the Consumer Product Safety Commission; more than 3,000 of those visits result in amputations, usually of fingers or hands. The medical bill to reattach a severed finger runs from about $10,000 for a clean wound to more than $25,000 if there’s nerve damage, infection, or other complications, according to James W. Greer, president of the Association of Property and Casualty Claims Professionals, a trade group in Tampa. Factor in rehabilitation and lost time at work, and the cost per injury can easily reach six figures. Indeed, in 2002, the CPSC estimated the annual economic cost of table-saw injuries to be $2 billion. That’s more than 10 times the size of the entire $175 million table-saw market. Clearly, this is an industry that could use a better mousetrap. That’s what Gass figured he had in the summer of 2000, when SawStop’s technology made its debut. A year later, the Consumer Products Safety Commission awarded the device its Chairman’s Commendation for product safety. Popular Science magazine named it one of 100 Best New Innovations. Tool industry bigwigs seemed impressed too. “It is probably one of the most major developments in the area of product safety applicable for table saws,” said Peter Domeny, director of product safety for S-B Power Tool, which makes Skil and Bosch tools. So, four years later, why isn’t SawStop on every table saw on the market? That’s the funny thing about better mousetraps. Build one, and the other mousetrap makers will probably hate your guts. They might even try to squeeze you out of the mousetrap business altogether. Just ask the inventors of air bags, safer cigarette lighters, and automatic shutoffs for electrical appliances — all of which encountered resistance from the status quo. Ultimately they prevailed and their innovations became standard. Gass still has a long way to go. Gass didn’t set out to take on the power-tool industry. Nor did he ever see himself as an entrepreneur. The amateur woodworker was standing in his workshop one day in 1999, staring at his idle table saw. “The idea came to me that it might be possible to stop the blade quickly enough to avoid serious injury,” he says. A patent attorney who also holds a doctorate in physics, Gass loves nothing more than solving complex technical problems. He got out pencil, paper, and calculator and got to work. Stopping the blade, he figured, would require a two-part process. First, he needed a brake that would work quickly enough when it came into contact with a woodworker’s hand. Next, he had to design a triggering system that could differentiate between finger and wood. Given the speed of the blade, it would have to stop in about 1/100 of a second — or at about an eighth of an inch of rotation after making contact. Any further, and the cut would be so deep that the device would be useless. To stop the blade this quickly would require about 1,000 pounds of force to decelerate the blade in 10 milliseconds. That calculation took Gass about 30 minutes. The trigger problem was a little more complicated, but Gass came up with the idea of running a small electrical charge through the blade. The system would sense when the blade hit flesh because the body would absorb some of the charge. The resulting drop in voltage would be enough to trigger the brake and stop the blade almost instantly. Gass spent two weeks designing the technology and, using a $200 secondhand table saw, an additional week building a prototype. Then he began to experiment. With the blade whirring, he touched his hand to its smooth side. It stopped immediately. The same thing happened when he ran a hot dog into the blade’s teeth. Gass repeated the experiment dozens of times — and each time the blade stopped immediately. Convinced his invention would be embraced by the industry, he videotaped a demonstration, registered the patent, and set out to convince manufacturers to license the technology, which he had dubbed SawStop. He sent a video demo to Delta Machinery in Jackson, Tenn., one of the largest table-saw manufacturers, and waited. Gass was pleased with his results, but he also knew there was something else to be done: He had to test SawStop on a real finger. “There’s not a lot of demand for a saw that’s safe for hot dogs,” he says with a laugh. And so, on a spring afternoon in 2000, Gass stood in his workshop and tried to summon the moxie to stick his left ring finger into the teeth of a whirring saw blade. He had rubbed the digit with Novocain cream, hoping to dull the pain of the cut. On the first try, his heart beating furiously, he eased in close but recoiled before making contact. A few minutes later, he tried again. This time, he rolled his finger close enough to get a faint red mark, but panicked and pulled back before the brake triggered. By now, his forearm was cramping from the tension. It was difficult to keep his hand steady. Still, on his third attempt, he kept his nerve — and the blade stopped, just as he knew it would. “It hurt like the dickens and bled a lot,” he says. But the finger remained intact. Several months later, Gass finally heard back from Delta. “No, thanks. Safety doesn’t sell,” he says he was told over the phone. (Delta, now known as Delta Porter Cable, is now owned by Black & Decker. A Delta spokesperson who asked not to be identified denies that a Delta employee made the comment.) Gass could not believe his ears. “Everybody in woodworking knows somebody who’s lost a finger or had an accident,” he says. How could a major manufacturer not be interested? “These guys would walk up to us and say, ‘I wanna shake your hand.’ A lot of them were shaking with two or three fingers missing.” Gass refused to give up. Working with three other lawyers from his Portland law firm, David Fanning, David Fulmer, and David D’asenzo, he raised $150,000, built a more sophisticated prototype, and signed up for the International Woodworking Fair in August 2000 in Atlanta. The reaction there was phenomenal. SawStop’s booth was packed with spectators who stood riveted as Gass and his partners fed wiener after wiener into the table saw. “Afterward, these guys would walk up to us and say, ‘I wanna shake your hand for doing this,” recalls Fanning. “A lot of them were shaking with two or three fingers missing.” It was all the validation the four men needed. A month later, Gass and Fanning walked away from law partnerships to pursue SawStop full-time. Fulmer, an associate at the firm, followed a few months later. D’asenzo invested in the venture but kept his day job. The fall of 2000 was hardly an auspicious time to launch a start-up. The Internet boom had just gone bust, the Nasdaq was in free fall, and investors were gun-shy. Yet SawStop was so practical and easy to understand, the trio had little trouble raising $1.2 million in angel funding from several different investors. They invested in more R&D, better prototypes, and small salaries for the three principals. “It was a no-brainer,” says Grant Simmons, a New Orleans urologist who invested an undisclosed amount in SawStop after reading about the company and seeing a video demonstration in 2004. It was Simmons’s first experience as an angel investor, and his interest was more than just financial: His father was a lifelong woodworker who had lost a finger in a table-saw accident. “This is revolutionary,” Simmons says. “They are applying basic physics in a practical way to address a very important issue that people in the industry have totally ignored — safety.” Gass, Fanning, and Fulmer, meanwhile, filed more than 50 patent applications to protect their invention. The only thing they lacked was industry cooperation — but that seemed inevitable. After all, they believed, common sense and consumer demand ultimately would win out. What’s more, the technology had implications far beyond table saws. It could potentially boost the safety of all power saws, including band saws and circular saws, as well as nail guns, lawn mowers, and other products. For the next two years, the partners engaged in what seemed to be promising talks with high-level executives at Emerson, Black & Decker, and Ryobi. In January 2002, they appeared to have turned the corner when Ryobi agreed to license SawStop’s technology. Under the terms of the deal, there would be no up-front fee; Ryobi would pay a 3% royalty based on the wholesale price of all saws sold with SawStop’s technology. The number would increase to 8% if the majority of the industry also licensed the technology. It was not a get-rich-quick deal, but Gass believed it was a vital first step. When the contract arrived, Gass noticed a typo and called Ryobi’s attorney, Bob Bugos, to make the correction. Gass says Bugos apologized and promised to take care of it right away. (Ryobi representatives declined to comment for this story.) When a week passed and the revised contract still had not arrived, Gass called back. He says Bugos was very apologetic and assured him the contract was on its way. Again, it didn’t come. Gass says he called every two weeks and each time Bugos made the same promise. After about six months of going back and forth, it finally dawned on Gass that the Ryobi deal, like all the others, was going nowhere. Indeed, the major power-tool manufacturers have professed to be somewhat less than impressed with SawStop. “The device has not been field-tested for results, durability, and reliability,” said a representative from Delta Porter Cable. “It’s an experimental system, not yet field-proven.” According to Dan Lanier, the Defense Research Industry attorney, all of the manufacturers approached by Gass independently tested and evaluated the technology. And each one, Lanier said in an e-mail, encountered “sign injury even when it works, Gass asks the following question: Isn’t it better to walk away with a cut, even a deep one, than to lose a finger or a hand? “I think they were looking for reasons not to implement it,” he says. Gass sees the objections as a smoke screen for the industry’s real concern: the increased risk of product-liability litigation. In most cases, when people sue power-tool manufacturers because they’ve lost a finger or hand in an accident, they’re unsuccessful — because it’s tough to prove that the manufacturer did anything wrong. Add SawStop to the mix, however, and the picture changes. Suddenly, the industry is promising an injury-proof saw. What if someone got hurt? “The manufacturer would be at a deeper risk and more vulnerable because it had made a promise of what the technology could do,” says Jim O’Reilley, a product-liability expert at the University of Cincinnati. “Companies are going to be reluctant to expose themselves to that higher risk.” Indeed, precisely who would assume that risk turned out to be a major sticking point in SawStop’s licensing negotiations. The manufacturers believed Gass should indemnify them against any lawsuit if SawStop malfunctioned. Gass, however, says that he could not possibly make such a guarantee since he would not actually be manufacturing the saws. And there is another facet to the liability issue. If SawStop did come to market and was proved effective in preventing accidents, it might be easier for plaintiffs to win lawsuits against manufacturers of traditional saws, because juries might be more likely to return a verdict against a manufacturer that chose not to implement SawStop. That’s the main reason, Gass believes, that the big tool makers are refusing to deal with him. They want his product to go away. After the deal with Ryobi fell apart in mid-2002, Gass, Fanning, and Fulmer faced a tough choice: Abandon the company and return to practicing law or build the saws themselves. None of the men had ever run a company, but they all understood that it’s one thing to be an inventor and another to be an entrepreneur. They would be responsible for designing, manufacturing, marketing, and sales along with the day-to-day operations of a business. It was a tough prospect — but not a tough decision. All three agreed that if they didn’t act, their technology would never see the light of day. “It seemed like the right thing to do,” says Fanning. “There aren’t very many opportunities to make money and do something good.” With wives and kids to support, Gass and his partners have found that the decision has not always been easy to stand by. Gass fondly recalls the six-figure salary he earned as a patent lawyer. At one point, he was so close to returning to his legal career that he got quotes for renewing the legal-malpractice insurance policy he dropped when he devoted himself to SawStop. “I never doubted my invention or wanted to give up, but I’ve wondered if we would be able to keep going,” he says. “It’s been touch-and-go several times with money, and we always manage to pull through at the last minute.” SawStop now operates with eight people out of a two-story barn Gass built himself. Filled with electronics, high-tech machinery, and every tool imaginable, the first floor is a handyman’s paradise. In the corner is a large stack of woodworking timber left untouched since Gass launched his venture. Gass logs 12- to 14-hour days running the business upstairs. Desks, computers, and filing cabinets fill the second-floor office space. A map of the United States hangs above the conference table. It’s dotted with colored pushpins, each one representing a city where someone has purchased a SawStop table saw. The first one rolled off the assembly line of a Taiwanese manufacturing plant in November 2004. SawStop has since sold about 600 and has 300 more on back order. A basic contractor saw retails for $799; the professional-level cabinet saw goes for $2,500. The company relies on trade shows, news stories, word of mouth, and ads in woodworking magazines for marketing. Selling online and direct-to-consumer is an acceptable way to get started, but Gass knows that to reach the larger market he will need to get into home improvement stores, where competition for shelf space is fierce. He’s had discussions with Home Depot and Lowe’s, but neither has committed to carrying the product. “Accidents are usually caused by human error, but this saw grants you forgiveness,” says one contractor. So for now, Gass is banking on people like Sharon and Don Biers, owners of Collins Custom Cabinets. After one of the employees at their Lowell, Ark., shop lost a finger in a power-saw accident in February, the Biers bought a $2,500 SawStop cabinet saw and have since ordered two more. It didn’t take long for the purchase to pay off. Within two weeks, another employee, John Stroud, inadvertently shifted his hand into the path of the blade and the saw shut down when it hit his fingernail. “We made the calculation that it’s worth it for the safety of our guys,” says Sharon Biers. “The accidents are usually caused by human error, but this saw grants you forgiveness.” And not just for professionals. In May, Gass received an e-mail from a high school shop teacher in Princeton, Wis. “I have a sophomore who still has two thumbs thanks to your saw,” the man wrote. The company knows of at least five other amputations that have been averted. With the big tool companies declining to participate, SawStop is seeking other ways to make sure its technology is adopted. In April 2003, the company filed a petition with the Consumer Product Safety Commission to make SawStop-like technology standard on all table saws. Six months later, the Power Tool Institute, a consortium of 17 power-tool makers, filed an opposing brief in which it argued that SawStop is a “speculative and untested technology. In addition, the cost to consumers and manufacturers of granting the petition would far outweigh any benefits that may be realized.” The industry also claims to be developing its own safety systems. The CPSC is expected to release its findings this summer. If it states, as Gass hopes and expects, that the technology is effective, it will be the first step in a long process of making SawStop — or a similar injury-prevention system — mandatory. Meanwhile, the industry’s product-liability fears appear to be coming to life. In 2003, a construction worker walked into the Wellesley, Mass., office of attorney Richard J. Sullivan. He was looking for someone to represent him in a case against Chicago-based S-B Power Tool. The worker had lost his thumb and four fingers while using a table saw. Doctors were able to reattach them, but even after six surgeries and $150,000 in medical bills, he still had no real functionality in the hand. Living on workers’ comp, he fell behind financially and was forced to sell his home. Sullivan turned the case down twice because he didn’t see a way to hold the manufacturer accountable. Then a colleague told him about SawStop. “His injury occurred on a saw manufactured in April 2003 and sold in May 2003,” Sullivan says. “The industry has known about this technology since 2001. That gave the manufacturer plenty of time to react.” The lawsuit, filed in Massachusetts state court in the summer of 2004, alleges that the manufacturer was negligent for not implementing the technology and seeks compensation for lost wages, future lost wages, and pain and suffering. (Attorneys for S-B Power Tool responded in January, denying all claims.) “If Gass can figure this out by tinkering around in his backyard, what has this industry been doing for the past 20 years?” asks Sullivan, who has since taken on five similar cases. “They’re like the auto industry, which had to be dragged kicking and screaming to install air bags.” Gass believes that Sullivan’s cases are only the tip of the iceberg. “The legal standard says you have to make a product as safe as you reasonably can, and if you fail to do that, you’re going to be responsible,” he says. While Gass wants SawStop to be successful financially, he also admits that what began as an interesting physics problem in his workshop has become something of a crusade. “This is important to society and that responsibility weighs on me,” he says. “It would have been so much easier if the manufacturers had just licensed this. Then, having SawStop would be just like having a stereo with Dolby or running shorts with Gore-Tex.” Indeed, Gass still dreams of getting out of manufacturing altogether. He really doesn’t want to make the power tools we buy. He just wants to make the power tools we buy better. Melba Newsome is a freelance writer in Charlotte, N.C.
