As a part-time general counsel to businesses, I run into this situation quite frequently so I hope this blog post can save prospective clients some money. If you own or run a company and have hiring authority over independent contractors, you need to know a few factoids about copyright law. The first, purely interesting, factoid to know about copyright law, is that the source for copyright law derives from the United States Constitution. Article I, Section 8, Clause 8 of the United States Constitution, also known as the Copyright Clause or the Copyright and Patent Clause provides: "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Thus, the idea behind the copyright law is to provide protection and incentives to authors to create useful "writings" such as literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture, and more recently the telecasting of NFL football games, website, blogs, tweets, etc. The second factoid to know about copyright law is that copyright law protects original "works of authorship" that are "fixed in a tangible form of expression." Thus, if the content or work product is original and written down so you can hold it in your hands or see it with your eyes, it is protected by US Copyright Law. This copyright protection attaches the moment it is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device. The third factoid to know about copyright law is that copyright law applies even if the "author" does not file an application to register the copyright with the United States Copyright Office. It's a good idea to register the copyright because additional protections are afforded to registered works as opposed to unregistered works, but it's not a requirement. The Fourth factiod to know about copyright law applies to ownership, and this is a biggie. 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. However, the ownership rules and requirements are different depending on the employment or independent contractor status of the author.
Add Comment General Counsel Advice - Hidden Risks from Licensing Deals with Other VC Backed Tech Startups 02/06/2012
As part-time general counsel, we work with startup companies on licensing transactions. Here is an issue to keep a heads up over. If you work for a tech startup company, and especially a venture backed startup, this article is for you. If your software VC backed startup enters into enterprise software licensing contracts with other VC backed startup companies this article is really for you. Question: What does your VC backed startup company have most in common with the VC backed startup companies with which it enters into enterprise software licensing agreements? Answer: Both companies are for sale to larger companies. So, what are the business risks that arise when your enterprise software customer is acquired by a larger company? First, there is the risk, if you have not carefully drafted your licensing agreement, that you will have lost a larger customer. The acquiring company may get perpetual right to use your enterprise software throughout its huge enterprise as part of the fruits of the acquisition. Second, and far worse, there the risk that the acquiring company, which may be a potential purchaser of your VC backed company, will have no need to acquire your company because it can get all the rights it needs to your technology by purchasing your customer. When two VC backed startup companies are entering into enterprise software licensing agreements, the licensing party should discuss what happens if and when the customer (licensee) is acquired. The contract should include some agreed restrictions on the ability of an acquiring company to get the keys to your company's technology kingdom, and the ability to greatly expand the number of seats. This is an area for negotiation, and it should not be ignored. What? You Settled the Case! 01/30/2012
We believe that most small to mid-sized businesses should work with a part-time general counsel, and should use their part-time general counsel to help manage outside litigation counsel. Here is a story that may make your blood boil. It's a fairly common practice amongst bill by the hour litigators to jokingly express outrage within the firm for settling cases short of trial. After all, early resolution results in a lost hourly billing opportunity for the law firm. I've heard this from senior attorneys in firms where I worked, and I've heard this from other attorneys I know. Pretty offensive, but it illustrates a point about reactive legal services. Richard Susskind, in his book, The End of Lawyers? Rethinking the Nature of Legal Services, notes that there is a fundamental tension between law firms and clients. "The client will generally hope their legal requirements are routine and can be disposed of quickly and painlessly, while the law firm will generally hanker after more challenging instructions that will occupy them for more time." (pg. 149). Most reactive legal problems lead to longer and more costly legal assignments. This is usually hard to avoid. However, proactive legal work and training can help avoid costly legal problems and businesses and executives are wise to embark on a proactive legal strategy with attorneys such as our program. As part-time general counsel to our clients, we share their legitimate interest in minimizing our involvement and the cost of legal services. We also understand that sharing this goal may lead our clients to seek our assistance on more complex and high value legal work. Through proactive training and legal coaching, we align our interests with our clients' interests, we deliver a high ROI, and everyone wins. Alternative Fee Arrangements are all the rage these days, and the hourly billing models is getting lost of bad press, but this is nothing new. According to the 2002 ABA Commission on Hourly Billable Report, “the overreliance on billable hours by the legal profession:
Our part-time general counsel law firm practices law in the Greater Seattle and Bellevue, Washington area. People who know me, know that I once co-owned a litigation support company. This company does litigation copying and scanning for law firms in the greater Seattle area. It’s a highly competitive business. I had great people who ran and operated this company so it did not take much of my time or attention. Thanks to them once again! Even before the economy crashed, the company began marketing the ” Select Firm Program.” The concept was simple; use our company for all of your outsourced litigation copying and scanning work, and you will get the lowest prices in town. The same high quality work product for less money. The sales team presented this as a tool firms can use to demonstrate to their clients that they are working to deliver high value and help reduce litigation costs. One problem, and it’s a big one. Almost every law firm that our sales team pitched this cost savings proposal to respond that they did not care about price because their clients pay, not the firm. “We don’t care what it costs. Our clients pay.” Yes, you read that right. Ironically, and even more shocking, a few law firms that rejected the cost saving proposal with the “we don’t care, our clients pay” response, later asked for lower prices when they could not pass the bill through to their clients. This is just one example of how law firms look for cost savings and efficiencies to reduce overhead, but do not do the same to deliver greater value to their clients. The economic interests of the law firm, especially big law firms with large overhead, are not aligned with the economic interests of the law firm client. This is offensive. Law firms owe their clients a fiduciary duty, and surely this includes spending the clients' money wisely. If anyone offers our law firm a way to save our clients money, our ears are wide open. This is an integral part of our law firm culture. If it is not a part of your attorney’s law firm culture, get a new attorney. Be Wary of the Lawsuit Selling Lawyer 01/28/2012
Some lawyers, especially lawyers who exclusively bill by the hour, sell their clients on filing a lawsuit. It's not hard to do. The client is upset because they have been wronged in someway, and the attorney can direct the client's frustration and anger into filing a lawsuit. Not all attorneys do this, but many do. After all, what could be better for the lawyer than a client who will pay the lawyer on an hourly basis to battle it out in court? And remember this - when it comes to most commercial litigation and pay by the hour lawyers, the lawyers take no risk because they get paid win, lose or draw. Before filing suit, ask the hard questions and demand hard answers: How can a lawsuit benefit us? What will we accomplish with this lawsuit, what will the ROI likely be, and is there a better way to go? In addition, in many cases the business should consider hiring an independent and experienced litigator to coach them through the litigation decision-making process. Having an experienced lawyer who does not stand to gain from filing the lawsuit will often help you make a better decision. I'm not a fan of arbitration. I have found that it costs just as much if not more than a court battle, and you cannot appeal an arbitration gone bad. These are serious issues that every business owner and executive should discuss with their attorney.  I'm also not a fan of court battles because they take so long and cost so much. When it comes to the consumption of pay by the hour legal services, time is money, and time is serious money when the trial date is 18 months away. Here is a suggestion to consider. You're not going to ever have a perfect litigation or a perfect arbitration. Things will go wrong no matter way. The goal should be to get it over with as fast as possible so you can get on with your business. If you agree with this philosophy, you may want to consider including a rocket docket arbitration clause in select contracts that: (a) appoints a named arbitrator to handle all disputes; (b) sets a hearing date deadline of 30 to 60 days from the date of the Demand for Arbitration; (c) requires mandatory disclosure of evidence. Having the lawyers battle for 30 to 60 days will cost you far less than having the lawyers battle for 547 days (18 months). Win or lose, getting past the dispute as cost effectively as possible is often is the best thing that can happen for the business. Blaine Millet is a friend and social medial consultant to CEOs and executives. His company, WOM10’s tagline is "Word of Mouth on Steroids." Blaine and I had a discussion recently about professional services and value. In a prior life Blaine worked for one of the Big Eight accounting firms. He once made a comprehensive project proposal to a mid-size business owner, and after he finished his presentation, the business owner responded, "Blaine, this sounds great, but what's the good enough price? I know you can help us, but we cannot afford this package. What can you do for us that's good enough, and how much will the good enough package cost?" When it comes to drafting core business contracts any business attorney can draft an iron clad one sided contract that eliminates almost every risk the business may face from the transaction. In fact, this is what many business attorneys do. However, that kind of an approach to contract drafting, often times, does not work for the business owners the following reasons:
DIY - Forming a Company in Washington 01/26/2012
If you are looking to form a company in the State of Washington, the link below is very helpful and from the Citizen Media Law Project. I suggest that everyone start here because much of this is pretty easy to do and, for most simple entity formations, people can do it themselves. Forming a Corporation or LLC in Washington. From time-to-time, I present a seminar called, How to Hire and Work With Attorneys the Smart Way (and not their way). It's been a hit within the non-lawyer community, but I've taken a few shots on the chin from my lawyer friends and colleagues. What follows is a bit of insight on how some lawyers bill their clients, and it derives from a recent lunch meeting I had with the Managing Partner of a small firm in the Greater Seattle area. This senior attorney told me the secret for how he was able to afford to purchase a second home. Did he use a financial planner? He might have, but this was not the secret. His secret: Perform one extra hour of chargeable work for one client each day. Assuming his hourly rate is $300 per hour, this results in $1,500 in gross revenue each week, and $6,000 in gross revenue each month. It's easy to see how you can fund a second home purchase under this revenue model. This is how some lawyers think about the value of their legal services and billing. Too often lawyers give no thought to the question, "" Does this billable hour of work deliver value to my client equal to my hourly rate?" This is especially true for attorneys who work for firms where performance is measured and rewarded by the number of hours billed. In fact, in many law firms, the attorneys are only eligible for a bonus if they meet or exceed their billable hour quota. So, how can clients use this inside information to their advantage? When you are hiring a law firm, ask how the firm measures and rewards attorney productivity. The "attorney productivity" phrase will likely sound like a foreign language to many attorneys you talk to because most law firms, especially most of BigLaw, only measure and reward billable hours. But, if you want to try to make sure the "billable hours" your attorney charges you are not designed to fund his or her second home purchase, ask the question: "How do you measure and reward attorney productivity at this firm?" |
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