DAK Industries
Encyclopedia
The DAK Catalog was published by DAK Industries, a discount electronics importer in the United States
, and was named after the initials of the company's owner, Drew Alan Kaplan.
, Los Angeles
, California
. A gadget freak, Kaplan founded his business while studying psychology at UCLA. On the side, he sold reel-to-reel tapes and installed stereos.
Kaplan spent five years at UCLA, but never earned a degree, then went into business full time, setting up shop in North Hollywood, Los Angeles, California
, to sell recording tapes. The Los Angeles Times
once called DAK the L.L. Bean of consumer electronics, adding though that Kaplan was reclusive and rarely granted interviews, and refused to be photographed.
By the late 1980s, DAK was a $120 million-a-year business with around 400 full-time workers. It was selling everything from radar detectors and stereo speakers to security lighting systems, hand-held photocopiers, and televisions with 2-inch screens.
Kaplan's 1/4 in DAK catalogue was mailed across the United States and Canada, and its hallmark was the unusual first-person style of the ads, each with Kaplan's byline and with up to 1,400 words of text per page. Every word was his own. The catalog featured colorful product descriptions. For example, of a computer modem, he wrote: "Sex Education 1A. You need to determine whether your computer's . . . connector is male or female. If you look at the picture above, you'll note that . . . connector has holes going in it. It's a female. If it had copper pins sticking out, it would be a male. Now wasn't that simple? So, if yours is female, order our male cable and modem program. . . ."
DAK was responsible for bringing a number of electronic gadgets previously unknown or little known in the US market to the public's attention; among these included an early bread making machine, and an early laptop computer, the Epson PX-8 Geneva
.
. DAK was forced to file for protection when Tokai Bank, a Japanese bank, suddenly pulled DAK's $18 million line of credit in August 1992. DAK continued in business until the case was converted to Chapter 7
in December 1994.
Kaplan wrote on his website, "Well the truth is, in 1994 I lost DAK. And it closed. I really can't blame anyone but myself. I was behind the banking relationship. It was the beginning of the Asian Meltdown. As far as I can see, my bank decided to retrench and we lost our credit line. I had never been able to find an American bank that liked the high volume/low margin business I had built."
DAK's catalog mailing list and customer database was valuable and sold during the bankruptcy proceedings to VentureDirect Worldwide. It was managed by Xactmail.com, a division of VentureDirect. Kaplan asserted it was not his buyers list, but that DAK customers were matched up against some other database.
. Microsoft had sought to obtain payment from DAK for a non-exclusive software licensing agreement covering mostly its Word
product.
The dispute was based on principles of bankruptcy law. A company in bankruptcy generally does not pay its debts while courts determine which creditors should get paid. But if that applied to all debts, no one would extend further credit to the company and it would be less able to administer the bankruptcy and ensure fair payment to its existing creditors. Therefore, bankruptcy law gives priority to new debts, incurred after filing of the bankruptcy, as part of of administering the bankruptcy.
DAK continued to use a copyright license from Microsoft after filing bankruptcy and did not make royalty payments to Microsoft, classifying the money owed to Microsoft as just another debt so that Microsoft would have to compete with other creditors for payment. Microsoft contended that the ongoing use of the license constituted an administrative expense and extension of credit by Microsoft, so should have priority over previous debt.
The U.S. Ninth Circuit held, however, that DAK's bankruptcy case was not entitled to priority as administrative expenses, and would instead be treated as nonpriority general unsecured claims. Moreover, it found DAK as the debtor/licensee was not otherwise required to pay any administrative expense for its post-bankruptcy use of the license. Thus, DAK was not required to make any administrative payments to Microsoft, even though DAK made significant use of the copyright license following the Chapter 11 filing.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, and was named after the initials of the company's owner, Drew Alan Kaplan.
Founding
DAK Industries was founded in 1966 and during the 1980s became a thriving mail-order electronics firm based in Canoga ParkCanoga Park, Los Angeles, California
Canoga Park is a district in the San Fernando Valley region of Los Angeles, California, United States about 25 miles northwest of Downtown Los Angeles....
, Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
. A gadget freak, Kaplan founded his business while studying psychology at UCLA. On the side, he sold reel-to-reel tapes and installed stereos.
Kaplan spent five years at UCLA, but never earned a degree, then went into business full time, setting up shop in North Hollywood, Los Angeles, California
North Hollywood, Los Angeles, California
North Hollywood is a district in the San Fernando Valley region of the city of Los Angeles, California, along the Tujunga Wash. It is bounded on the south by Moorpark Street and the Ventura Freeway, on the southwest by Burbank Blvd...
, to sell recording tapes. The Los Angeles Times
Los Angeles Times
The Los Angeles Times is a daily newspaper published in Los Angeles, California, since 1881. It was the second-largest metropolitan newspaper in circulation in the United States in 2008 and the fourth most widely distributed newspaper in the country....
once called DAK the L.L. Bean of consumer electronics, adding though that Kaplan was reclusive and rarely granted interviews, and refused to be photographed.
1980s
Before the Internet, companies like DAK relied on catalogs to generate sales and incurred the high cost of printing and mailing. A large enterprise would have to create a great many catalogs to get sufficient sales. In 1985, Kaplan was involved in a lawsuit with his former printer, and court records show that he had ordered a run of 3.8 million catalogs.By the late 1980s, DAK was a $120 million-a-year business with around 400 full-time workers. It was selling everything from radar detectors and stereo speakers to security lighting systems, hand-held photocopiers, and televisions with 2-inch screens.
Kaplan's 1/4 in DAK catalogue was mailed across the United States and Canada, and its hallmark was the unusual first-person style of the ads, each with Kaplan's byline and with up to 1,400 words of text per page. Every word was his own. The catalog featured colorful product descriptions. For example, of a computer modem, he wrote: "Sex Education 1A. You need to determine whether your computer's . . . connector is male or female. If you look at the picture above, you'll note that . . . connector has holes going in it. It's a female. If it had copper pins sticking out, it would be a male. Now wasn't that simple? So, if yours is female, order our male cable and modem program. . . ."
DAK was responsible for bringing a number of electronic gadgets previously unknown or little known in the US market to the public's attention; among these included an early bread making machine, and an early laptop computer, the Epson PX-8 Geneva
Epson PX-8 Geneva
The Epson PX-8 aka Geneva was a small laptop computer made by the Epson Corporation in the mid-1980s.It had a Z-80 compatible microprocessor, and ran a customized version of the CP/M-80 operating system as well as various applications from a pair of ROM cartridge slots...
.
Bankruptcy
In 1992, DAK Industries filed a petition seeking relief under Chapter 11 of the U.S. Bankruptcy CodeChapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
. DAK was forced to file for protection when Tokai Bank, a Japanese bank, suddenly pulled DAK's $18 million line of credit in August 1992. DAK continued in business until the case was converted to Chapter 7
Chapter 7, Title 11, United States Code
Chapter 7 of the Title 11 of the United States Code governs the process of liquidation under the bankruptcy laws of the United States...
in December 1994.
Kaplan wrote on his website, "Well the truth is, in 1994 I lost DAK. And it closed. I really can't blame anyone but myself. I was behind the banking relationship. It was the beginning of the Asian Meltdown. As far as I can see, my bank decided to retrench and we lost our credit line. I had never been able to find an American bank that liked the high volume/low margin business I had built."
DAK's catalog mailing list and customer database was valuable and sold during the bankruptcy proceedings to VentureDirect Worldwide. It was managed by Xactmail.com, a division of VentureDirect. Kaplan asserted it was not his buyers list, but that DAK customers were matched up against some other database.
Microsoft dispute
During the bankruptcy case, computer software giant Microsoft Corporation lost a major lawsuit to DAK Industries. It was a decision that even today has significant implications for software licensors and also copyright license agreements under which distributors are given the right to sublicense or sell directly videos, theater or television rights, or other exploitations of intellectual propertyIntellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
. Microsoft had sought to obtain payment from DAK for a non-exclusive software licensing agreement covering mostly its Word
Microsoft Word
Microsoft Word is a word processor designed by Microsoft. It was first released in 1983 under the name Multi-Tool Word for Xenix systems. Subsequent versions were later written for several other platforms including IBM PCs running DOS , the Apple Macintosh , the AT&T Unix PC , Atari ST , SCO UNIX,...
product.
The dispute was based on principles of bankruptcy law. A company in bankruptcy generally does not pay its debts while courts determine which creditors should get paid. But if that applied to all debts, no one would extend further credit to the company and it would be less able to administer the bankruptcy and ensure fair payment to its existing creditors. Therefore, bankruptcy law gives priority to new debts, incurred after filing of the bankruptcy, as part of of administering the bankruptcy.
DAK continued to use a copyright license from Microsoft after filing bankruptcy and did not make royalty payments to Microsoft, classifying the money owed to Microsoft as just another debt so that Microsoft would have to compete with other creditors for payment. Microsoft contended that the ongoing use of the license constituted an administrative expense and extension of credit by Microsoft, so should have priority over previous debt.
The U.S. Ninth Circuit held, however, that DAK's bankruptcy case was not entitled to priority as administrative expenses, and would instead be treated as nonpriority general unsecured claims. Moreover, it found DAK as the debtor/licensee was not otherwise required to pay any administrative expense for its post-bankruptcy use of the license. Thus, DAK was not required to make any administrative payments to Microsoft, even though DAK made significant use of the copyright license following the Chapter 11 filing.