Succeeding in Your Business: Reviving the ‘Walking Dead’ corporation

By Cliff Ennico

“In the late 1990s, I invented a product for the healthcare industry. I obtained patents for the product and registered trademarks for the product name. I even formed a corporation in Delaware and registered it in Texas, where my husband and I were living at that time. Then, my husband (also an entrepreneur) moved his business to New York to be closer to his customers, and I moved with him. I had to help him with his business for a while, as well as raise two kids, so I put my dreams on hold for a while.{mprestriction ids="1,3"} The patents and trademarks expired because I did not renew them, and the Delaware corporation was voided because I didn’t pay the annual franchise tax in Delaware for a couple of years. Now my kids are off to private school, and I really want to revive this product and the company. I have some potential investors who are really excited about the product, but they want to deal with a ‘real’ company. Can I revive the company that I had in the 1990s, or should I start all over again from scratch?”

We all have our priorities in life and it sounds like you made the right choices, although I would love to know more about this product. Anyway, here goes.

Your first step should be to talk to a good intellectual property attorney who specializes in patents and trademarks. When you invented your product back in the 1990s, it was probably state of the art, but I’ll bet you the technology for this product has advanced leaps and bounds since then. You should be able to revive the patent (by refiling it from scratch), unless someone else has come along and claimed a patent for improved technology. Similarly, unless someone has come along and claimed the same trademark for a similar product or service, you should be able to file a new application for the trademarks you want to use to identify this product in the marketplace.

When talking to the patent attorney, there are two questions you have to ask:

1. Can you revive your patents and trademarks that have lain dormant for several years?

2. If you can, will the patents and trademarks be strong and withstand any challenge from new players who claim their designs are superior to yours because they are state of the art?

The second question is actually more important. Even if you can revive your patents and trademarks from the 1990s, they won’t be worth much if a bad person (say, someone in China or another country where patent protection isn’t that strong) can tweak your design (say, by adding a screw here and rounding off a corner there) and claim their product is a significant improvement from yours. Knockoffs are a fact of life these days, and if the state-of-the-art technology of your product hasn’t advanced much since the 1990s, there’s a good chance that an imitator or knockoff artist will be able to design around your patent without too much effort. If your patent attorney can’t give you solid comfort on this issue, do not proceed further.

If your intellectual property attorney tells you your patents and trademarks are still strong and can easily be revived, spend the money on that first. When those have been secured, it’s time to revive your Delaware corporation.

A Delaware corporation that has been voided because it hasn’t paid Delaware’s annual franchise tax is a bit like the walking dead in a bad horror movie: It still has a pulse and appears on Delaware’s corporate records, but anyone who comes along and wants to use the same corporate name will be able to get it as if the voided corporation did not exist. To revive the corporation (assuming someone else hasn’t grabbed the name), you have to call the Franchise Tax Unit of the Delaware Secretary of State office and find out how much you owe in unpaid Delaware franchise taxes. Once it tells you the amount, you must:

• File a certificate of renewal with the Delaware Secretary of State office (your attorney will prepare this for you for a fee of one hour’s time, plus a filing fee of $200).

• Pay the unpaid Delaware franchise taxes.

• Contact the company that acted as your registered agent in Delaware and tell it you have revived the company. The agent will probably want an annual fee of $200 to $300 to continue acting as your agent in Delaware.

Since you no longer live in Texas, there is probably no reason for you to revive your Delaware corporation presence there. Once you revive your living-dead Delaware corporation, though, you will have to register it as a foreign corporation in New York, where you now live and do business. Your attorney can prepare and file the necessary paperwork for a fee equal to one hour’s time plus filing fees that are usually in the $200 to $300 range.

Since forming a new corporation in New York (or Delaware) to manufacture and market this product will probably cost you between $1,000 and $2,000, it probably makes economic sense to revive your Delaware corporation from the dead and register it in New York. Just make sure you pay the annual taxes and fees in Delaware and New York to keep this corporation alive after you have awakened it.

Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt.” {/mprestriction}