Wed, 23 May 2012 08:51:54 -0800WeeblyTue, 22 May 2012 16:51:45 -0800http://www.gctogo.com/1/post/2012/05/why-its-hard-for-executives-to-manage-outside-counsel.html
This blog post asks a simple question:  Can you effectively manage your outside counsel?

Law.com published a great article today entitled, Why Do General Counsel Fire Law Firms?  The article quoted two GC's who both had the same story:  they fired the law firm for not properly staffing their legal work; the work was performed by more costly senior attorneys who should not have been assigned to the projects.  

This article highlights two stories, which we summarize here:

Shannon Pierce, a senior counsel at natural gas distributor AGL Resources Inc., recounted an instance where she asked one of her law firms to use an associate instead of a $600-an-hour partner to write a memo. But when she got the bill, it was for the partner.  "It was a $25,000 memo that should have been a $5,000 memo," Ms. Pierce said. After making several other staffing requests that went unheeded by the firm, she stopped using it.

A similar story was told by Stephen Kaplan, general counsel of Orlando-based Connextions. Mr. Kaplan hired a large Washington firm to handle a regulatory compliance matter, and  he thought the law firm irm was using partners to do work that could be done by less costly second- or third-year associates. He asked the firm to assign the work to asso­ciates, but they simply refused to do so.  "They said this was the way they'd always done things," Kaplan explained. Maybe for others, but not for him: "I dropped the firm."

This helps explain why it is hard for non-lawyers to manage outside counsel.  

Many non-lawyer executives lack the experience to know what seniority level should be assigned to their legal work, and there is an incentive for many law firms to assign more costly senior attorneys to work that could be performed by less costly junior attorneys, or senior attorneys at a steeply discounted rate. 

We wish it were not the case, but some attorneys and law firms put their economic interests ahead of the client's economic interests when staffing and billing for their work.   Unless you've seen and managed a lot of legal work, it will be difficult for you to know your legal project can and should be done by a less costly lawyer.  Making matters more complicated, many executives find it difficult if not impossible to challenge their law firms on legal bills.  

This is just a few more reasons why most businesses should work with a part-time General Counsel to help hire and manage outside counsel. 

]]>Wed, 09 May 2012 14:41:33 -0800http://www.gctogo.com/1/post/2012/05/copyright-law-who-owns-my-podcast.htmlThere is a ton of podcasting happening these days, and I'm even toying with a podcast idea myself.  The tools are inexpensive, and I think I can overcome whatever technical hurdles I may run into.  I'm a bit of a gadget guy. I like playing around with technology.    

I am also an intellectual property attorney, so I have also been thinking lately of podcasting and the Copyright Act.  (Have I just been uninvited from your next cocktail party?)  

Copyright in Sound Recordings & Phonorecords 

Copyright is a form of protection provided by US law (title 17, U.S.Code) to authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works.  Copyright applies to sound recordings.  Sound recordings are defined in the Copyright Act as “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.”  

A sound recording is not the same as a phonorecord. A phonorecord is the physical object in which works of authorship are embodied. The word “phonorecord” includes cassette tapes, CDs, and vinyl disks as well as other formats.   It appears that the digital copy of a podcast qualifies as a phonorecord under the Copyright Act. 

Copyright protection attaches at the time the work is cre­ated in fixed form.  For a podcasts, the copyright attaches when it is recorded in digital format and then the digital file appears to qualify as a phonorecord under the Copyright Act.  

What are the Copyright Rights?

Tthe 1976 Copyright Act generally gives the owner of copyright the exclusive right to do and to authorize others to do the following: 

• Reproduce the work in copies or phonorecords;
  
• Prepare derivative works based upon the work;
  
• distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending; 
  
• Perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audio­ visual works;
  
• Display the work publicly, in the case of literary, musical, dramatic, and Choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work;
• perform the work publicly (in the case of sound recordings) by means of a digital audio transmission.

So for the owner (or co-owners) of the copyright in the podcast, only he/she/they can exercise these rights over the podcast. 

Work Made for Hire Under the Copyright Act 

I have written about copyright ownership with employee vs. non-employee bloggers previously.   In short, the rules are different for non-employees vs. employees for certain categories of work; with non-employees they are the author and copyright owner unless they sign a written agreement with the "work made for hire" language.   This is the best practice for copyright ownership and non-employees.   In addition, it is a best practice to include language that assigns all rights in the non-employee's work product to the company or individual who commissioned the work from the non-employee.  

If you are interested, the Copyright Act defines a "work made for hire" as:

"(1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities."  

The take away point here is that sound recordings and phonorecords are not included in the list of categories that statutorily qualify as a "work made for hire."  Thus, it appears that the "work made for hire" doctrine is not applicable to a sound recording podcast -- though the recording industry practice is to include the work made for hire and assignment language in contracts with non-employees.   The recording industry has taken this position under the theory that the specially commissioned sound recordings qualify as works made for hire because it is a collective work or compilation and these categories are included in the "works made for hire" list.  Hence, there appears to be some room for debate and legal debates can be costly.  

Who Qualifies as an Original Author of the Podcast 

The House Report for the 1976 Copyright Act offers the following guidance with respect to copyright ownership in a sound recording:  "The copyrightable elements in a sound recording will usually, though not always, involve “authorship” both on the part of the performers whose performance is captured and on the part of the record producer responsible for setting up the recording session, capturing and electronically processing the sounds, and compiling and editing them to make the final sound recording." 
Hence, the podcast may have multiple contributors who qualify as "authors" who all have the right to claim ownership of the copyright as a co-author.  

If this is the result all of the contributors to the podcast knowingly want, there is nothing to worry about.  However, many podcasters probably think (or hope) that they and they alone own the copyright to their podcast. They never address the issue and if the podcast becomes a commercial hit, podcasters and their non-employee contributors have a legal argument and something (money) to fight over.  For podcasters using non-employees to help with the podcast, and who want exclusive ownership and the ability to claim clear title to the copyright in their podcast, the best practice is to include the work made for hire and assignment language in the signed written contract with non-employees.
]]>Wed, 28 Mar 2012 14:39:14 -0800http://www.gctogo.com/1/post/2012/03/follow-the-general-counsel-leaders-to-smaller-law-firms.html
There is a tendency among business owners and executives to hire larger law firms due to their "safe" BigLaw brand.   This is part of the "you won't ever get blamed from buying IBM" thinking.  

We believe that business owners and executives who don't hire attorneys everyday should follow the lead of the most sophisticated legal services consumers - general counsel from America's large companies.   We aslo advocate that business owners and executives should hire outside counsel like corporate America hires legal counsel--through their part-time general counsel attorney.  

In a Corporate Counsel post, Bye-Bye-Big Firm, Dana Olson opens with the following: "Move over, Big Law. Small Law is in. And the trend has proven to be more than a temporary reaction to the 2008 financial meltdown. Four years later, corporate lawyers are flocking to small firms."   

This terrific article includes the following examples:

• "AIG's deputy general counsel, says "small firms, in general, are more flexible. They're able to use rate flexibility, and still provide excellent service." 
  
  
• "I think big corporations are more careful about who they hire for what work," says the legal strategist, who founded Newport Beach–based Zeughauser Group in 1995. "They won't automatically hire big firms, which is what they used to do. They've become more sophisticated, which means they hire firms that are right for each individual matter.  "There's a lot of pressure from the general counsel's office on the lawyers in the department to keep costs down," Zeughauser continues. "For a lot of the day-to-day work that needs to be done, they're hiring small firms more and more." 
  
  
• Walcott, who is one of ten managing counsel for American Express Co., says the recession encouraged her to consider alternatives to the big-firm model. Small firms helped her follow her general counsel's edict: "Manage our budget." But she also found that they had special skills that matched her needs. She uses small firms to manage the legal areas she's in charge of.  One of the firms Walcott uses is Bortstein Legal Group. The group charges $395 per hour, a rate Bortstein says is 40–50 percent lower than that of his big-firm competitors. Clients receive the same level of expertise for a lower price, Bortstein says, because small law firms have a lower overhead, and the savings are passed to clients.
  

]]>Wed, 14 Mar 2012 08:48:59 -0800http://www.gctogo.com/1/post/2012/03/support-for-the-part-time-general-counsel-model-biglaw-dla-piper-to-fire-smaller-clients.html
The ABA Journal reported on March 14, 2012, that global BigLaw DLA Piper, has adopted a strategic plan that calls for the firm's partners to focus on providing more services to larger clients.  The ABA Journal reports that this means, "some smaller clients will be jettisoned."   

The ABA Journal quotes DLA Piper global chairman, Tony Angel, "Some of our clients are too small to fit that model, so continuing to [represent] them doesn't make sense for them or us—even if the work is profitable."

On the one hand, this is somewhat offensive:  DLA Piper intends to fire its smaller profitable clients.  But, on the other hand, this decision makes sense for smaller clients who elected to hire a large firm like DLA Piper.  There is very little chance that a large firm can cost effectively provide high quality legal services to smaller clients when the law firm also targets much larger businesses as clients.   Yes, the large firm can provide high quality legal services, but they cannot do so cost effectively to the small to mid sized business because the large firm is organized to work with much larger businesses as clients.  They have too much overhead to support, and this can often lead to chargeable work that does not deliver high value to clients.  

DLA Piper's decision to fire small clients makes business sense for these clients, and Mr. Angel's comment is refreshingly candid.  In most cases, businesses should not hire law firms that are larger than the business to perform their legal work.  Every business must manage cash flow to exceed overhead, and law firms are no different.  

I believe that most small to mid sized businesses ($5M to $50M annual gross revenue) are best served by working with a part time general counsel, who can handle the business, transactional, and employment law legal needs of the business, rather than a law firm, or multiple law firms.  This outsourced general counsel, trusted advisor, model allows the attorney to become deeply acquainted with the client's business and goals, and this model works best if provided on a fixed fee monthly retainer model so the client can manage its legal services expense line item.   

Small to mid sized businesses should take notice of DLA Piper’s decision and Mr. Angel’s candid remark:  working with a law firm that targets larger businesses as clients does not make sense for either the client or the law firm.  The part time general counsel model makes the most sense for the small to mid sized business, and is far more cost effective than small to mid sized businesses working with large law firms who target large business clients.  
 
]]>Tue, 13 Mar 2012 11:11:28 -0800http://www.gctogo.com/1/post/2012/03/business-and-trademark-law-update-a-philosophical-battle-descriptive-marks-vs-arbitrary-or-fanciful-marks.htmlWe should take a moment to acknowledge a raging dispute between the trademark attorneys and the marketing and search engine community.

The trademark attorneys and the marketing and search engine optimizing communities are at odds.  Trademark attorneys encourage businesses to adopt unique, arbitrary and fanciful word marks whereas the marketing and search engine optimizing professionals often encourage businesses to adopt descriptive business names and matching descriptive website URLs to maximize search engine optimization.  This is one approach and it’s hard to argue with maximizing search engine results, however, adopting a descriptive company name and URL undermines the business goal of developing a strong and highly valuable trademark because descriptive and generic phrases cannot be registered as trademarks on the Federal Register, and this is where all the best and most valuable trademarks are registered.

For example, if a business owner intends to provide high quality landscaping services, it cannot register the words HIGH QUALITY LANDSCAPING as a trademark on the Principal Register.  The law of trademarks is grounded in fair competition and permits all landscapers to use this phrase to describe their landscaping services; the policy is that no single company should be permitted to exclusively own and use the HIGH QUALITY LANDSCAPING.

The best word trademarks and service marks are arbitrary and fanciful.  A fanciful mark is a made up, or coined term, that had no meaning before its use as a trademark.  For example, when you seen the terms, COCA-COLA and EXXON, only two companies comes to mind.  These are both very strong trademarks.  Similarly, when you see the letters UPS, only one company comes to mind.  This is a very strong service mark.   An arbitrary mark is an existing word that has come to indentify the company or product.   For instance, the words MUSTANG and JAGUAR have become trademarks for certain automobiles. 

Here are more examples of arbitrary and fanciful marks.

Examples of Fanciful Marks (coined terms that had no meaning before trademark use)

VERIZON (cell phone)
POLAROID (cameras)
PEMCO (insurance)
OREO (cookies)
LEXIS/NEXIS (legal research tool)
KODAK (camera)
XEROX (copies)
EXXON (gasoline)
HARPO (for Oprah Winfrey’s company)

Examples of Arbitrary Marks (existing words that have come to identify the company)
AMAZON (online retailer)
YAHOO! (search engine)
BING (search engine)
GOOGLE (search engine)
SUN (computers)
CANNON (copiers)
DOMINO’S (pizza)
DOMINO (sugar)
APPLE (computers)
NICKELODEON (cable television network)
COMET (kitchen cleaner)
SHELL (gasoline)

The goal is to come up an arbitrary or fanciful marks for your company, products and services.  Doing so will add the greatest value to your company. 
]]>Mon, 12 Mar 2012 15:57:30 -0800http://www.gctogo.com/1/post/2012/03/risk-management-update-copyright-ownership-employee-vs-contractor-blogger.htmlLet’s face it; blogging takes time and busy business owners and executives may have better uses of their time. Thus, it may be better to delegate the company blogging responsibility to one or more employees or hire an independent contractor to write the company blog.

These scenarios trigger copyright issues that should be understood, especially if the company plans to hire a blogging contractor.

The general rule of copyright ownership is that the person who authors the work owns the copyright. If there is more than one author of the work–a joint work–all of the authors own the copyright.

Does this mean employees own the copyright to blogging content the company pays them to write?

No. If the company assigns the blogging duty to an employee over whom the company has control, their blogging content falls within the “work made for hire” definition, and the employer company owns the copyright. After all, the company paid the employee to blog as part of his or her job duties, so the company should own the copyright.

What about independent contractors?

For the very reason that blogging can be time consuming, a cottage industry of contractor bloggers has emerged. If your company hires an independent contractor to blog, their work falls within the “specially ordered or commissioned work” definition under the the Copyright Act, and the general ownership rule applies (the author owns the copyright) unless there is a signed written agreement that specifies that their work is a work made for hire. In the case of contractor bloggers, a written contract makes all the difference in the world.

What’s the big deal?

If your company hires an independent contractor to write the company blog without a signed work made for hire agreement, under the Copyright Act, the contractor has the exclusive right to reproduce the work, to write derivative works (ie. squeals) based on the work, to display and distribute copies to the public, and the right to transfer ownership of their work to a third party. Your contractor could force you to remove the content they wrote for your company blog, they could use the content for another company, and they could even sell it to a third party. Hence, it is vital for to have a signed written agreement with the blogging contractor that says his or her work is a work made for hire (as well as non-infringement reps and warranties and indemnity clauses to name a few).

What if it’s too late?

If the company forgot to have its contractor blogger sign such a contract, it may not be too late. The company should put one in place for all new content written by the contractor. And, depending on the relationship between the people, the company might be able to obtain ownership to the copyright in the contractor blogger’s content, but only with a properly drafted and signed written agreement. You should definitely try.

For more information on works made for hire, download and read: Works Made for Hire under the 1976 Copyright Act.

]]>Tue, 06 Mar 2012 10:18:05 -0800http://www.gctogo.com/1/post/2012/03/contracting-to-block-the-patent-trolls.htmlListening to Phil McKinney's fantastic Killer Innovation podcast this morning, I picked up a great idea on how to use contracts to block patent trolls.   

Patent trolls add no value and offer no innovation to society, and it won't surprise you to know that many patent trolls are attorneys.  Patent trolls acquire the rights to patents and take advantage of the intellectual property laws to sue companies that they believe, rightly or wrongly, may be infringing on the patent.   The companies sued are faced with the choice to pay to settle the patent infringement lawsuit because defending this kind of case can be more costly than settling the case.   Patent trolls can especially wreck havoc on the small to midsize business market, and this is where a lot of the new jobs are created.   
Sellers of patents who want to block the patent trolls should adopt a policy that requires all contracts for the sale of patents to include language prohibiting the purchasing company, and its successors and assigns, from using the patent in offensive or pro-active patent litigation.   This policy will instantly make the patent unattractive to the patent trolls.  

Great idea, Phil McKinney, and I highly recommend the Killer Inovation podcast to everyone in business.

]]>Wed, 29 Feb 2012 07:13:52 -0800http://www.gctogo.com/1/post/2012/02/happy-leap-year-thanks-for-the-extra-billable-hours.htmlBill by the hour law partners, associate attorneys and paralegals woke up this morning and breathed a small sigh of relieft.  

Today, February 29, 2012, provides an extra 24 hours of billable time, and it's landing on a weekday instead of the weekend.  Extra billable hours and no need to work over the weekend for them.  That's a double bonus.

Non-parter timekeepers--the associates and the paralegals--will huddle around the coffee station and quietly joke about how they hope "the firm" does not raise the billable hour target by an extra 8 hours.   Firm owners will joke that they should, and that the firms they worked for when they were associates always raised the billable hour target on Leap Years.

According to timeanddate.com, Leap Years are required to keep our calendar in alignment with the earth's revolutions around the sun. 

To billable hour professionals, the science is interesting, but not inspiring. 

What is inspiring to billable hour professionals is that today, the Leap Year Day, gives them an extra 24 hour opportunity to bill clients and to meet their billable hour annual targets.  

This year, things got just a little bit easier.

Happy Leap Year Day!   
]]>Mon, 27 Feb 2012 08:52:42 -0800http://www.gctogo.com/1/post/2012/02/sleep-deprivation-and-the-value-of-legal-services.html Because I provide part-time general counsel legal service to the small to mid-sized business market, my friends who work in that sector share stories about working with their law firms.  For reasons lost on me, many of these companies gravitate towards larger law firms for all of their legal work.

A friend recently told me that he learned from a secretary at the large law firm his company uses that the law firm partner he works with was unavailable because he was napping after working a 48 hour marathon to get a transaction done.  This same friend reports that he routinely receives email from this same partner at 2am, and they work in the same time zone.  This partner charges somewhere between $500 and $600 per hour. 

More than anything else, lawyering is a thinking and judgment profession, and there is no question but that a lack of sleep impacts a person’s cognitive abilities.  If you need "authority"
for this proposition, check out the Perelman School of Medicine at the University of Pennsylvania, who published a study, Neurocognitive Consequences of Sleep Deprivation,  Jeffrey S. Durmer, M.D., Ph.D and David F. Dinges, Ph.D.  This  study states, “In general, regardless of the task, cognitive performance becomes progressively worse when time on task is extended; this is the classic ‘‘fatigue’’ effect that is exacerbated by sleep loss.”  

No surprise here.

My friend’s story about his sleep deprived large law firm partner speaks volumes about the value of legal services.  Keep in mind; this partner charges between $500 and $600 an hour, for every hour he bills a client.  

Can there be any question that a lawyer cannot possibly deliver $500 or $600 worth of value to a client for each of the 48 hours he worked in a 48 hour marathon?  Does anyone think their lawyer is on top of his or her game at 2am when he or she is answering email?   If the lawyer is not on top of his or her game because of sleep deprivation, should the law firm discount the hourly rate, and by how much?

This story also speaks to the culture of large law firms.  Their culture is to meet or exceed the annual billable hour target, and the desire to work well into the night and early morning to meet that target is sometimes too great to resist.  Perhaps the decision to keep working this late is impaired by sleep deprivation itself.   

I suggest to my friends who continue to work with large law firms that they should not allow their lawyers to bill them for work past 10pm.  I tell my friends who work with this kind of a law firm to simply say:  "If you're going to pull an all nighter, don't do it on our dime." ]]>Fri, 24 Feb 2012 13:13:42 -0800http://www.gctogo.com/1/post/2012/02/ten-ways-you-might-be-able-to-tell-if-youre-paying-your-law-firm-too-much.html

1. Your law firm has a better view from its office lobby than you do from your office lobby.
   
2. More people come to your law firm's employee picnic than your company picnic.
3. Your law firm's holiday party is more grand than your company's holiday party.
4. Your law firm offers paid sabbaticals to its partners. 
5. Your law firm has a full time Director of Marketing on staff and you don't.
6. Your law firm has more partners than you have employees.  
7. Your law firm has more offices than your company does.
8. When you call your law firm with an issue that is non-standard for your main lawyer contact, he or she refers you to "my partner" or "my associate" who handles that kind of an issue. 
9. You are not spending your own money.  You spend investor money.  
   
10. You do not have a part-time general counsel that hires and manages your company's outside law firm.
11. Bonus - Your law firm's business model is to bill by the hour and to never offer guaranteed price quotes.

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