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Hi, my name is David golden. I

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 am the founder and CEO of capifi and the head

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 of originations of lender Capital Partners. I am one

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 of the founding fathers of merchant cash advance industry.

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It's been more than a decade since David golden and

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 his team fought for the alternative Finance industry

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 as we know it.

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He started in the space back in the mid-90s while working

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 in the credit card processing industry golden had

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 a realization that changed the trajectory of

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 his life. One of the concepts that I realized very

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 quickly. I was a very commoditized industry is that you need

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 to evaluated product and that is when I'd seen

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 that there were a few companies at the time. This was in

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 2002 that were advancing money against

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 credit card sales. And that's even before the term MCA merchant

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 cash advance existed that sort of spawned

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 it and capified back then was known as a mirror Merchant

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 and making us more on the first.

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Merchant cash advance providers in the world Golden's own

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 business amerimer Merchant grew and succeeded. We

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 had become a reseller for a company called

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 Advanced me at the time which later rebranded as Capital Access

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 Network or can Capital today.

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And we became their largest reseller very

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 very quickly. So the history

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 is the CEO and president of advanced

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 me. I'd gotten a call from their assistant.

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That they wanted to come see me in New York City.

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So we had a meeting in my old conference room. We were much smaller

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 company, you know, we had peaked at 225 employees. I

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 think we're about 20 employees back then.

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And they came and you know, they said they were upset that

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 they lost me as a reseller Golden's company

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 had switched from becoming a reseller for advanced me

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 to becoming a direct provider of capital itself. And

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 that's when the unexpected happened.

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They understand why one of my own but they wanted to

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 give me the privilege of being able to license their technology.

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So as soon as they said the word technology I said so

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 you must mean underwriting risk analysis.

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Back then again much different than it is today.

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Couldn't really understand what they were getting at that point.

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And they said no we want to license you our patent.

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And I said, well, what's the patent?

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And they said well it splits

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 up the processing.

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And I had a processing background I said, well what's new in

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 novel about that? Why would I pay to do that? They wanted a percentage.

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 Imagine all your viewers in the business had to pay three four

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 five percent of all the receivables with Advanced me taking

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 no risk just to have the license to be able

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 to be in the business.

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So I quickly saw with this was going so I challenged them

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 and said, can you explain why this is new in novel and they

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 sort of sidetracked and said, you know, what? Why don't we have our attorneys talk

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 to your attorneys and we'll figure out a way to if you guys to license it, you

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 know, perhaps give you stock and you know, when we go public a

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 mirror Merchant could be a much bigger entity.

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So they left.

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I was waiting to hear from them. I come to work the next day and

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 there's four or five FedEx boxes on my desk.

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And it wasn't Christmas time and I

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 opened the first one up and it's

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 from a law firm saying we've noticed you've been

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 sued in the eastern district of Texas for patent infringement. The

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 pan was a concept David new was not anything new

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 and since he had a firm understanding of the business he

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 understood the battle. He was up against

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So why exactly did the company

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 get sued by advancement? So Advanced me had managed

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 to put through the patent office

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 the idea of holding back.

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A percentage of sales for a loan or an advanced

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 or another product and the term which many of

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 your viewers may not know today is called split funding because the

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 products evolved to be a lot different but back in

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 the day there was no fixed daily or weekly amount coming out of the repayment

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 method. It was a percentage of sales. So Advanced

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 me it had patented even though it was done many

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 years before the patent the concept that

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 if you gave someone money and they processed $100.

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And they were withholding 10% 10% would

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 be sent back to the capital providers such as advanced me

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 and 90 dollars back to the customer.

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That was the whole concept of the business method patent.

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 David says the lawsuit named several different companies

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 as defendants some that don't exist today.

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 He knew the only way he was going to win

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 the lawsuit was by invalidating the patent itself something

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 that was going to cost some a lot of work and money

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 in validating. This patent was winning this case.

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And the term in patent lawsuits

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 is called prior art where you have to prove that the

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 patent existed through a knowledgeable

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 publication or other documents and let's

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 call a spade a spade before the bank was invented

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 or was founded there really was not a lot of coverage

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 on this industry and the payment processing industry. It's not like

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 Us magazine with celebrities and everything else not a very sexy industry that

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 people constantly write documents about or or massive Publications.

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So even though we use quote unquote a prior

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 art search service. It came up empty right,

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 but I knew based on credit card processing and

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 chargebacks and reserves and other programs back

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 in the day. This was not a new in novel idea.

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 So I had to figure out a way to raise millions of dollars.

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And I would do the work knowing the industry or learning

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 the industry of finding these hidden documents

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 that were probably from the 1980s and 1990s that back then

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 I don't think there was Google News. It wasn't really archived. I

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 mean this was real detective work with all hands

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 on deck. David says it took him six months to gather

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 his team. That would help him fight the patent.

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It involved a unique strategy that helped

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 change the industry forever. How did you

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 guys fight back? How did you guys start, you know getting the ammo ready

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 to go to war for something that's you know, you guys pretty much were

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 not the odds were against you.

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 I figured out that the only way to win this is to round up

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 all our competitors because Advanced it wasn't just suing a mirror

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 Merchant. They were trying to get precedent between myself and the

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 other defendants that once they won. It would be very hard

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 for the other companies.

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To beat this and I rounded up about 10 companies.

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 I remember the meeting. We added New York City Adam Atlas

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 was there the payments attorney specialist Jeff Sanders.

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 This is before we chose our law firm

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 and the speech I gave it was during the time when President

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 George Bush Jr. Was president and the

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 concern was with Iran getting the nuclear bomb analogy I

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 used is this is similar to that analogy for our industry.

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If Iran gets the nuclear bomb, there's no

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 taking it away. If Advanced me wins this case against

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 us because we can't afford to fight it. There's no taking away the

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 precedent and they will then come after everyone.

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And own the industry have Monopoly the team David gathered were

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 later be known as the small business finance Association

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 the meeting helped him raise over 30 million

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 dollars.

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And in the process David met one of his key players

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 that would help him fight. I was introduced to a gentleman

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 by the name of Tim Lytle. And Tim lytle's probably

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 not the reason but was a key

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 reason we had won this case along with many other people that helped us including former

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 advancing employees. That didn't think what Advanced he

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 was doing was

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Proper what Tim

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 had done is Tim had done a form of merchant cash

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 advances in the 1980s. He did something called the

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 postage advance.

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Where back then it was mail order catalogs, and

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 it was and it was a chicken and egg situation.

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In order to send the catalogs out. These companies needed a vast

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 amount of money for postage except to generate sales.

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They need the catalogs to go out. They didn't have the money to send them out, but they

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 knew once they went out the money would work. So he would he would

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 Advance the money to the postmaster.

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Send the catalogs out and when the sales came in,

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 he would take a percentage of sales.

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To repay his advance.

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MCA all in 1980s

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Tim says, let me get this straight.

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If I don't help you invalidate this patent.

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And I want to go back into the business of advancing money

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 to my merchants.

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I have to pay these guys a royalty fee.

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And I said you got it and he said all right, let's do

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 this.

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With a solid team backing him David spent almost a

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 year working to invalidate the patent flying back

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 and forth from New York to Texas David and

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 his team knew they had to fight or else the MCA and

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 alternative Finance industry would be

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 squashed before it even took off.

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More than a decade later. He says it's an unforgettable experience.

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 We had the trial and Tyler, Texas. So

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 everyone went down in Texas well myself and

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 my legal team the defendants that were named and then

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 obviously the plane if he employs a testified on their

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 end.

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The way it works is you have to hire a local Council from Texas

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 on top of your National Council. So

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 there are a lot of holes in it. We knew it we went for the

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 holes. These are gold mines to these law firms, right? So they

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 search the docket they don't even use regular mail. They FedEx

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 to try and get in the door right away with at

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 the time in the Eastern just District of Texas, which is a

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 hotbed for patent enforcement because the juries

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 usually awarded major damages to the

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 plaintiffs.

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So knowing what I know now is the reason Advanced me

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 sued us is they didn't want us to then try and bring this to another jurisdiction. They

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 wanted to lock in the lawsuit golden says despite

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 the hard work and odds being against him. His team

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 was strategic in court. They knew they

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 had the material to fight and the hard work paid

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 off in the end part of his I had to read that document twice to

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 really understand what we won. I called my attorney and

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 started calling all the other members of the association that

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 helped make this possible that funding it and it

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 was just you know, it was completely Euphoria, right?

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 We knew that it was an amazing

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 result. We beat the odds obviously the New York

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 Times thought it was an amazing story as well. They had soon published an article

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 a month later.

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The monumentus win was an only A1 for Golden

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 but also for the entire industry as we know it today.

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David explains without this one Brokers and

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 funders would all work differently, but they be paying Advance

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 me pick a number two, three, four five percent of

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 the receivables collected a servicing fee for without

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 Servicing.

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So it would cut into margins extensively

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 but the fact that a business method

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 patent was invalidated in the eastern district of

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 Texas back in 2007 was unheard of

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 in the financial services sector. I mean all the

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 odds were stacked against us the impacts of the wind could

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 be seen today and golden says it's important that

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 younger Brokers understand this court case and

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 how it changed the industry forever. Obviously the

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 outcome, you know, you guys won. What did

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 you do for the MCA business first and foremost,

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 I think if I didn't

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 do what I did many of these people would either

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 be working for advanced me right now, or they wouldn't be in

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 this industry at the size of this today with the

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 opportunities that exist today and I'm hopeful that I can be

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 an inspiration for others down the road that should another

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 event pop up.

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That they realize that it's going to take somebody to

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 really step up with the right knowledge and the

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 right drive to really fight this. So overall if

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 you had to do it again, would you do

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 it again?

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It would probably a lot easier to do it. Now. You have Google

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 Google news people save documents on the cloud. It was

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 really tough back then right really tough. You have text messaging

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 phones social media. It's a lot

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 easier today to track it down, you know.

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 So look I I think invalidating a

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 patent while I'm not a patent attorney, you know, I'm grateful

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 to the team of Vincent Elkins that we had the time. I learned a lot

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 about patents and patent enforcement. It's a

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 lot easier to invalidate the patent then start trying

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 to make the argument that that you don't violate it.

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in New York Johnny Fernandez the bank

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 news