I have a confession.

I have a confession to make, I'm an internet stalker - sort of.  I've been doing a lot of interviews over the last few months.  In addition to researching the company and the position, I've also been researching the individuals I'll be interviewing with.  It's amazing, and a little bit scary, what can be found on the internet.  With one perspective boss I was able to find his personal twitter account, his religious activities, his political point of view, that he likes basketball and not football, he has three kids, his address and even the value of the house he's living in- thanks to public tax records.  For another I was able to find some publications he did at a previous job, pictures of his wedding and even that he was a big fan of Dr. Who.  (I didn't get the chance to ask which doctor is his favorite - I'd go with #5 or #11, but didn't want to get to controversial in an initial interview.)  And a third, I read his wife's mommy blog and probably found out way to much about his family.

Through LinkedIn I'm able to find out about a persons background, and also their network.  I've been able to successfully use this to get my resume in front of someone who's a 'friend of a friend of a friend'.  I'm also able to keep tabs on who else they're connecting with recently, which may be my competition for the position.  While I was at my last job, I was able to predict with a fair amount of accuracy who was about to leave based on their activity on LinkedIn.  Someone who suddenly updates their profile and starts connecting with people senior to them in the industry is probably interviewing or at least looking at moving on.

I'm working on my addiction - not sure if there's a Professional Internet Stalker's Anonymous.  In the meantime, I thought I'd use my little piece of the internet to warn others.  There is a ton of information about you on the internet.  Whether you're the one being interviewed, or the one interviewing, expect to be Googled and searched on LinkedIn at a minimum.  Candidates are regularly advised to clean up their online profile before applying to any new position.  Those on the other side of the table don't get similar advice.  You may not want your perspective employee to see that you like to dress up in Cosplay and attend ComicCon annually before they know what color of carpet is in the lobby.  

Finding the Lesson

Any long time reader knows that I'm a big fan of finding lessons in everything I can.  My personal motto (thanks to a wonderful uncle) is 'You can learn from a jackass what not to do."  When you're working in a professional atmosphere there's no shortage of opportunities to put this motto in to practice.  I've been lucky enough to be able to learn a bit about everything in corporate operations from HRIS to finance from some very qualified and patient co-workers.  I've picked up bits and pieces of other area of law from great friends and outside counsel to the point where I've become very comfortable doing basic employment, IP, litigation management, marketing and both sales and procurement transactions for a variety of different industries.  I've been incredibly lucky so far to have this opportunity.

Over the summer I've taken a break from the professional world and have been spending more time with the kids at home.  I'm finding that I'm not quite as adept at seeing the lessons from a two year old. With him, more often than not I am playing the role of the jackass.

A couple of weeks ago I was reminded by a post on LinkedIn that lessons are everywhere if we just open our eyes to them.  So with that in mind, I've been going through my summer looking for the lessons I missed - and since I love lists so much here are my top 3.

1.  Perseverance and creativity will pay off in the end.  I spent the month of July potty training my autistic four year old.  He has limited communication skills and is quite stubborn.  He didn't respond at all to the reward technique that we used to very quickly train his big brother - he loves M&Ms but couldn't quite get the correlation between going and getting more.  So I had to get more creative and be very, very patient.  After about 3 weeks he finally got it, and while we're still working on the finer nuances (boys and aiming is quite a challenge!), we're there.  In my working life, sometimes the first approach doesn't work.  Maybe it's a lack of effective communication, maybe it's a wrong assumption of underlying facts.  What matters is that we keep looking for an effective resolution and not be afraid to use a methodology that hasn't been tried before.

2.  While perseverance is king, sometimes you just need a break.  My two year old is learning something new everyday - new language, new physics, new abilities of his body.  It can be overwhelming.  He's as stubborn as his brothers so he'll keep trying to get it right for as long as it takes.  However, he's two and sometimes he needs a nap or a rest before he can focus enough to get it right.  I've realized that I'm not much different.  I may not need a nap everyday (although wouldn't that be nice!).  However sometimes I do need to step away and take a fresh look at the problem after I've cleared my mind.  So put down the contract that you're struggling with the wording for 30 minutes.  Go for a walk, work on some trademark/marketing stuff instead.  Get your mind thinking about something completely different and then approach it again.  You'll be amazed at how taking a break gives you a new perspective and makes that huge issue seem a little more manageable.

3.  You can't control everything.  As any young kid can tell you, there's only so much in this world that you directly control.  You can be on your best behavior, eat all your peas and still have to go to bed at 7:30.  The world is made up of rules and conventions that may sometimes bend but are best if not broken.  This is true for adults too, although we often maintain a self-delusion of having complete control over our lives.  Afterall, we can go to bed anytime we want.  But we can't make the judge rule how we want them to, or make our boss like that proposal any more if he's already decided on a different option.  Sometimes, we'll get farther by accepting the things we can't control and working more effectively in the confines of those conventions.  After all, for all the time my 6 year old spends complaining and fighting about going to bed too early, he could actually be spending that time playing and accomplishing what he wants to do after bed time.

I'm still learning the lessons these little overlords are trying to teach me.  In the meantime, I think I might pick up my job search a bit more - these three are more demanding than any CEO or GC I've ever worked with! I could use a vacation. ;)  

Recruiters, to use or not?

When it comes time to look for a new job or hire a new team member we all struggle with the question of whether or not to engage a recruiter.  They can be expensive and territorial.  But they can also have in place relationships that can quickly make that perfect match.  So, do you use one or not?

From the employer point of view, I almost always recommend using a specialized recruiter for legal department hiring.  Unless your company has a substantial legal department, most internal recruiters won't hire more than one or two lawyers in their career.  They don't know the difference between transactions done in a merger/acquisition and those done for day to day operations.  They won't pick up on the personality difference that's likely to occur in a former plaintiff side vs defense side litigator either.  As the hiring manager you'll spend more time weeding through completely unqualified candidates simply because they have the requisite number of years in practicing law and a few optimized key words in their resume.  And it's not the recruiter's fault.  It takes lawyers some time in real world practice to know there's a difference between employment law and labor law.  How would someone who's asked to pay attention once every three to five years supposed to figure it out effectively?

With a specialized recruiter, usually a former lawyer, you get someone who can ask the right questions and get to a more nuanced job description.  They also spend a lot of time cultivating their networks of qualified candidates to pull on quickly when they get a match.  This means they typically know a bit about the candidates' personality as well as their CV.  Generally this makes for a better fit.  Of course recruiters can be expensive, 20-25% placement fees are common.  However consider the lost opportunity cost of waiting months for the internal recruiter to find the right fit and it doesn't seem so expensive anymore.

From the job candidate point of view, it's a little more complicated.  Recruiters don't work for you.  They work for the company.  It doesn't matter how great you think you'd do at a certain job, if the recruiter doesn't think you're a good fit or thinks someone else fits better you won't get presented to the employer.  But if the employer has decided to use a recruiter, you're not likely to get to them otherwise.  So you are forced to work with them if you want to work for the company that hired them.  

It's actually not that bad, some of the nicest people I know are legal recruiters.  I actually make it a point to know at least one recruiter at each of the major recruiting agencies in my market.  They can give you the insight on a job before it gets posted and help you feel out personalities and fit before you waste weeks on the interview process.  However, they don't work for you.  So getting you working again is not their job.  It's yours.  Generally networking with a recruiter or working with one on a specific position is not enough.  Network with them all, and keep networking with other professionals.  You may just find that your next job isn't through a recruiter directly but through someone they know.

How to Say No.

We've all heard the (and probably repeated often) the in house lawyer motto - "never say no."  It's a rule that we live by - always find a way to help your client accomplish their goals.  Don't say no, say we can't do it that way but here's how we can accomplish the same thing.  It's one of the most valuable traits of an in house lawyer and also a trait that differentiates us from firm lawyers.  Because of that it's one of the first things we teach lawyers coming in house for the first time.

Often though, we stop there and don't go on to acknowledge the fact that sometimes the answer is plainly and simply "no."  As in, 'No, you can't dump your toxic waste into the lake no matter how much cheaper the fine is than the cost of disposing of it properly.' Or 'No, you can't fire the pregnant woman because she's over forty and her ovulation gets on your nerves.'

At some point in your career you will be asked a question that boggles your mind and challenges your Never Say No motto.  We've been warned over and over again that saying no will change the way the business looks at you.  It will turn you from the trusted business partner to the dreaded legal hurdle.  You'll start being left out of meetings and decisions because the business is more afraid that you'll say no than they are of just doing the wrong thing anyway.  So how do you give the best advice without bringing down house of cards around you?  The secret is in how you communicate the answer.

I was asked a hypothetical question based on a real world example.  If this hadn't had been just X but had also had Y involved, could we handle it the same way?  I answered directly and simply - No.  More would be involved - more cost, more effort and more publicity.  That was not the answer the business wanted.  It did change my relationship with that team and damaged the reputation that I had spent years building.  Another attorney was asked the same question.  From a legal and ethical standpoint, the only right answer was No.  However he more artfully deflected the question.  Instead of going into the legal analysis of the question asked as I did, he answered with questions of his own - why do we need to know that?  Is there a risk the Y would be involved?  Was that risk material or was this merely an academic exercise?  Because there are so many variables that aren't tied down in the example there's no point in talking about what if's.  For the actual situation we did not need to go through the extra costs that I discussed.  His non-answer was much better received and set him up to become a trusted adviser for that team.

Sometimes you don't have the luxury of hypotheticals to help you weasel out of giving the direct "no" answer.  You're faced with a real time question that requires a definitive answer.  You'll get the same response  that I did above if you go directly with a simple 'No we can't' approach.  You have to buffer it with some explanation that shows that you've considered not just the legal implications but the business ones as well - i.e. "I realize that delaying the start of the new employee from next week to the normal X number of days it takes for the immigration paperwork to be complete will slow down the project and cost the company in both productivity and time.  However, if we don't follow the law precisely in these cases you run the risk of the company losing it's ability to sponsor other candidates - but you as the signer on the paperwork could face personal criminal liability.  We sponsor an average of 3 employees a quarter, this one project isn't worth jeopardizing all the rest."

Don't get me wrong, your client still won't like hearing No.  They never do.  But the reality of in house practice is not that we never say no - it's that we never just say no.

10 Commandments

I get a lot of visitors to this blog from the key word search "how to manage outside counsel".  Indeed, that seems to be a question at many in house focused CLEs as well.  With the pressure on us in house folks to keep costs down but results up, we have no choice but to figure out how to better manage our outside counsel.  In the process of figuring out how to do that, I've come up with a few universal requirements.  These Commandments apply to any type of matter that I might send to outside counsel and the goal is always to achieve the best results for the best value.  Note that we don't always go with the cheapest hourly rate or the snazziest alternative billing proposal.  But we do consistently look for a partnering with a firm that wants to work with us to get the most value we can for our companies.  So in no particular order (they are equally important):

1. Know my industry.  I don't expect you to fully understand every motive behind every business decision.  That's what we do in house, we don't need you second guessing the decisions our company makes.  However, I do need you to understand the industry in general and who the players are.  For the most part, my firms need to know who my top competitors are and not represent them, or seek to even in non-adverse matters.  Nothing will lose confidence in a firm more than name dropping a competitor to one of my business partners.  They don't trust lawyers as it is - don't give them more reason to be suspicious.
2. Do not over-bill.  I know this seems like it shouldn't be an issue in 2013.  But it is.  Apparently not all in house lawyers scrutinize their invoices, so some outside counsel don't think twice about the amount of time they bill for a matter.  It took that 2nd year associate 6 hours to draft that trademark application so of course they're going to bill for all 6 hours.  However, I know that if a more experienced lawyer had done it, it would have taken 1 hour.  And if I had done it, it would have probably taken me 45 minutes.  So when I see 6 hours on the invoice I get very annoyed.  Where's the value in that for me?  Look at every line item and only charge me what is reasonable even if your team was inefficient about it.
3. Don't double charge me.  I get that firms have to train their new associates and that's how we get good lawyers.  But here's the thing - I don't want to pay the tuition for that education.  I'm already paying hundreds of dollars an hour for a newbie that doesn't know anything, why do I also have to pay for the partners time to correct all of their mistakes?  If you are reviewing a subordinate's work or 'catching' up on the case so you can call me and pretend like you're tuned in, cut your time in half (at a minimum).  If you're involved in a deposition or call because you're supervising your junior attorney to make sure they don't make any glaring mistakes, bill me for your time and write off theirs.
4. Staff appropriately.  This crosses several service industries, but law firms are not immune.  I should not be paying partner rates for fill in the blank forms.  At the same time, I'm more than willing to pay the partner on the case to lead the critical deposition in the bet-the-firm litigation.  Understanding the difference should be intuitive, but if it's not - ask me.  This is one of those things where there won't be forgiveness later.  
5. Be transparent. I hate getting invoices with line items like "Attention to matter 2.5 hours" or "Discussion about...".  With a passion.  I refuse to pay for that - ever.  Giving the benefit of the doubt, it's probably research and drafting or even meeting with the team members to strategize.  But what it sounds like,  "I thought about the matter in the shower and on my commute to work today so I'm going to bill the client for it."  Give me enough detail on the invoice so that I know exactly what was done, who you talked to, and how long each task took.  I hate getting statements that have 30 descriptions on one line item for a total of 7 hours billed.  How the hell am I supposed to know what type of value I'm getting with that jumbled mess?
6. Communicate.  I know that things in the legal system don't resolve themselves overnight.  This is just as true of patent applications as it is of litigation.  But I also know there are a hundred little movements that show progress along the way and give some indication of how things are going.  I don't need you to tell me what the judge had for lunch, but do give me a fairly consistent update on the state of things.  If there hasn't been an update in two or three weeks but you're expecting one next month - tell me that.  It takes less than a tenth of an hour to draft that line in an email or call and leave a voicemail.  And it gives me something to tell my management team that is constantly fretting about it.  It also helps me have a realistic view of what type of invoice I should be expecting at the end of the month.  So if I have to ask for updates more than once you won't be getting my business twice.
7. Budget with me - then stick too.  Generally if I'm hiring you it's because I don't have the skill, expertise and/or time to handle the matter directly.  So I need you to be honest and objective with me when setting out the scope of the matter.  I have to set budget expectations for my company.   Give me a realistic view of what the matter is going to cost.  Then stick to your projections.  If you think you're going to vary by more than a couple of points, you need to tell me first.  Lay out the costs of the current strategy and alternatives (along with the costs of those alternatives and their likely result.)  This gives me what I need to go back to the CFO and get more money if necessary.  When my numbers are wildly off, I look bad.  If I look bad, you look bad.  Don't make us look bad.   
8. Watch the third party costs and pass thru overhead.  When I see an invoice that has a $60 charge for a database or copying while I'm paying a couple hundred for the hour of work that accompanied such charge I start to think that you are bad at negotiating your third party vendor contracts or your algorithm for how you allocate costs is inefficient.  When I see a pass thru cost for a $80 dinner in the office while you worked late to get that motion finished on time I again think you might be inefficient and that it must have been a very nice dinner that I'm not paying for.  When I travel I'm limited by company policy to a reasonable per diem and coach travel arrangements.  Please follow suit.  It's impossible to justify to finance why they need to approve and pay an invoice where our vendors are passing through costs that are much more lavish than those allowed our own employees.  
9. Don't charge me for client development.  I really wish this wasn't a thing.  If you are sending me updates on your area of law, you are showing me that you stay current and are an expert.  If you are alerting me to some movement that one of my competitors is taking that may be adverse to me you are fishing for business.  When you come into town and ask me to have lunch/dinner with you, you are establishing or strengthening a relationship that you hope will lead to more business either directly or by referral.  I understand this is how your business is done and I put up with the incessant updates and invitations and try to play nice in return.  However, do not charge me for that favor.  If I see even one tenth of an hour charged to "updating client" or worse, researching the current state of affairs on my behalf without my asking you to first,  I will blow my top.  You will be fired and every other in house attorney I know will hear about how incompetently you manage your relationships.  
10. Don't go around me.  I know you're trying to get the business.  But going to my boss or one of my business partners directly trying to sell how you're an expert in x area is not doing either one of us any favors.  I have a strategy for how I assign work to my firms.  When I'm having to spend time justifying my strategy or explaining to the CFO that although you've got a great golf game there's someone else who is better fitted to this particular matter, I'm not going to be happy.  And that means you won't get any more work from me.  Because no matter what you do or say with by business partners, legal spend is my responsibility.  And they already trust me, that's why they hired me.  So there won't be much of a fight when I say that we should go with a more economical/more expertise than you have for every new matter.  

So those are the sins that will get you kicked off of my firm list.  Have any more to add?

Theory vs. Practice

As law schools all over the country are matriculating a crop of new would be lawyers, I'm struck by the difference between the legal theory we're taught in law school and the realities of legal practice.

An illustration: an artist acquaintance was venting about a deal gone bad.  She had signed a contract for a performance in Europe.  Only after arriving and the day before the show, the promoter informed her that he couldn't afford the original contract price and would only be paying her half.  She had spent almost that much just getting there, so needless to say she was less than pleased.  At this point in the conversation it turned to the all too familiar refrain, "Tanya, you're a lawyer - can't I sue the little bastard?"

And the little law school prick buried in my head (we all have one, go ahead and admit it) started picking out all of the legal theories on which a case could be made.  Like a law school exam question I pulled out all the issues I could spot - clearly there's a breach of contract, maybe some detrimental reliance.  Did performing after the price cutting conversation constitute an amendment to the contract?  Nah, but even if it did she clearly only agreed under duress as she need to recover the cost of getting to Europe.

And then, my better judgement woke up and I stopped myself from going too far.  What did it matter?  Yes, of course she could sue.  But why would she?  The legal fees alone to litigate the matter would eat up any recovery she might be awarded - if the 'little bastard' actually had anything to pay her with.  Even if she went the small court route without an attorney, she was going to waste her time and was unlikely to get anything out of him.  He'd already proven that a written contract didn't mean anything to him, would a judgment mean more?  Did she want to go through the hassle and expense of trying to have a judgment enforced for a couple of grand?  A better solution would be to invoice him for the unpaid contractual amount and after he didn't pay, turn it over to a collections agency on a contingent basis.  Not as emotionally satisfying but realistically it's a much more practical answer, and just as likely to lead to her actually recovering anything of value.

And that, my friends, is what makes lawyers so valuable.  Our American legal systems allows a person to sue for a lot of reasons.  Some of them are even just.  But the real value lies in knowing when to ignore the theory and do the practical - and in the ability to convince your client that just because you can doesn't mean you should.

So You're the First?

Being the first attorney for a company isn't easy.  It isn't easy finding those jobs, and it isn't easy figuring out what to do once you get there.  If you are currently working in houses at a job that you like, you should send a thank you note to the first attorney who ever worked for the company.  Like them or hate them, they fought some battles that you never would even think about so that you can have the position you now have.

I've recently had a few conversations with some colleagues who have shared this experience and we compared battle scars.  The consensus seems to be that the biggest challenge to being the first is the fact that most businesses don't hire in house counsel until about a year after they really needed one.  So that means you spend a lot of time putting out fires while trying to carve your niche and make the role "your own".  We all wished we had some clue as to what the real priorities should have been, so I'm giving you one.  Take this with a grain of salt - this is based on my experience being the first in house lawyer at two firms.  It's a limited sample size and may be shaped by the personalities involved. This also doesn't discuss figuring out whether the organization is looking for counsel because they're growing, or because they're dying - that's a separate post altogether.

For those of you considering taking that first lawyer job, think hard - it's a lot of work that will definitely go unrecognized, but it's also one of the most rewarding things you'll ever do professionally.  Once you do decide, here's a few things you should do immediately.

1.  Clearly define the role.  Most CEOs start wanting to bring legal work in house because they're paying too much to outside counsel or they're getting too involved in the routine contracts and need to off load it on someone.  When they seek out a lawyer, they're really only concentrating on the one pain point.  If you don't clearly define the role prior to starting, you may find yourself relegated to contracts manager instead of legal counsel.  Make sure that you and your CEO are on the same page as to whether you are to be a strategic part of the management team or an operational member.

2.  Clearly define expectations.  Even if you've agreed on being strategic or operational, you should also define the expectations of what you are capable of doing or not.  Most business folk have dealt with attorney's in a limited role on one or two major issues.  The rest of their expectations about what lawyers do is filled in by tv and stereotypes.  You'll need to set the expectation that hiring you won't completely eliminate outside counsel spend.  You'll need your new boss to understand that you can't force competitors to stop being unethical so long as they're doing it legally.  You'll also need your new boss to understand the consequences of the strategic vs operational role.  If you're not involved in strategy then it's unfair for the big boss to expect you to tailor agreements or risk to accommodate for the 5 year plan that you never knew about. Make sure you're both on the same page as to what will be expected of you so that after the first year you aren't questioning your decision to take this role and your boss isn't questioning whether all lawyers are incompetent.

3.  Meet the power players.  Definitely introduce yourself to the company's management team.  You should have one on one meetings with everyone on the leadership team within the first 30 days.  Take them out to lunch and ask them how you can help their team.  But also do some snooping and find out who the real power players are.  Does the CEO's admin control his schedule with an iron fist?  Yes, then become his friend.  Is there a controller who seems to have more sway with the CFO than others?  Take her to lunch.  Is there a sales person who somehow seems to know all of the internal politics?  Do his contracts first.  It goes without saying, in corporate America internal politics matter.  Competent people are sidelined and incompetent people get ahead based on playing the office politics game better.  It sucks, but you have to play the game or at least be aware of who is.

4.  Set yourself up for an early win.  Whether it's an easy litigation matter, a major contract that's been stalled, or a new process that reduces review times dramatically.  Come up with something that proves your value quickly and to the widest audience possible.  You're expensive.  They've never had an attorney before and there are bound to be some members of the team that are skeptical about how much value you actually add.  Show them early and turn your detractors into cheerleaders.

5.  Get used to be on your own.  As the first lawyer you're going to be doing a lot of non-lawyer things.  Filing your own stuff, drafting your own letters and addressing the envelopes, creating your own binders, etc.  Things you may be used to having support staff doing.  But you don't have support staff now.  And the quickest way to make an enemy is to ask the CEO's admin to run out and grab lunch/coffee for you during your first week.  You're own your own now, get used to it.

6.  Don't be too helpful.  This may be more for the female lawyers out there.  We tend to be service oriented people.  We want people to be happy, so we'll make sure that they have water at a meeting or that there are enough chairs in the conference room.  We'll go to their office or rearrange our schedule 3 times to accommodate their schedule.  It seems like we're being helpful, team members and checking our egos at the door.  But what we're really doing is setting ourselves us as secondary.  It gives the impression that we're support staff to the leadership team instead of a part of the leadership team.  Don't be rude or go out of your way to flex your ego, but don't completely lock it away either.  Push a little for meetings to happen on your schedule.  Schedule them in your office.  Make sure that it's clear that your priorities are as important to the company as the priorities of the head of HR.  There's definitely some give and take here, and it's hard to walk the line between being in a service oriented role and being support staff.  But if you allow yourself to be viewed as the latter, you'll never be taken completely seriously in the former.

So there are my top 6 things to do as soon as you start your new gig as a company's first.  Anyone else have battle lessons to share?  

Start Ups Need Lawyers: Part III Marketing and IP

As April is Autism Awareness month, I've slacked on posting new content and instead directed readers to this old post - How My Autistic Son Made Me a Better Lawyer.  It's a good post, if you haven't read it yet, go read it.  Then visit LightItUpBlue.org to see how you can help.  In the meantime, I'll admit that I've recently been solicited by a few loyal readers to get on with the next post in our Start Up series. So I'll stop being lazy and get to it.

After employment questions, the next questions my start up peeps ask about the most are marketing and intellectual property (IP) related.  For something that can make or break your company, understanding how IP works and what you need to do to protect it is critical.  But IP lawyers are notoriously expensive and most corporate lawyer types don't have a good understanding of how marketing and branding tie into IP other than in the textbook ways.  And most startups don't bring on in house lawyers until a year or two after they really should have.

To start with, it helps to know what type of IP you have.  Most recognized is going to be trademarks.  Registered or not, the company name, logo, tag lines, product names, etc. are all part of your branding and may consist of valuable IP.  IP that needs to be properly selected and maintained in order to keep control over that value.  The most common mistake for start ups (or marketing types anywhere) is in the selection.  They tend to use images or names that are too descriptive and generic.  They want the consumer to know what they are getting, so they'll call car washing services, "ultimate car wash" and then wonder why they can't trademark it or stop competitors from using the name.  For a trademark to be enforceable, and thus valuable, it has to tell the consumer where the goods or services are from, not what the goods or services are.  It has to differentiate your car wash from your competitors, so that when they hear or see the mark they know immediately that it's your car wash. The more arbitrary the mark, the better - and the harder it is for a new company to gain that recognition in the consumer.  It's a fine line to walk, but remember at one time Apple had to introduce people to the concept that computers could be named after fruit and Google had to introduce not only a relatively new concept of searching the web but then tie it to a made up word.  Now they're both holders of some of the most valuable trademarks on the plant.   For this reason I always recommend that any branding strategy sessions include your in house lawyer.  If you don't have one, then you should at least have someone in the room who is thinking big picture on the trademarks and not just on the current campaign.  Once you've got a good trademark, make sure you speak with a trademark lawyer for an hour to get a good understanding of how you have to use your trademark in order to keep your rights to it.  The game isn't all over just because you've got a registration, that's where it actually starts.

The second most recognized IP right is patents.  Everybody thinks they know what a patent is in these days of patent trolls making headlines daily.  However, few entrepreneurs in early stages of business development think about patenting their technology.  Some are confused as to what is or is not patentable, some disagree with the whole patent concept and some are just too busy trying to get off the ground to think about getting formal legal protection for their innovations.  I honestly think ignoring your patent options early on is one of the biggest mistakes new start ups can make.  Getting a patent is expensive.  No doubt. And even most in house lawyers are not remotely qualified to have more than a cursory discussion about patents.  So you will need specialists.  But if you have something truly innovative, something that is revolutionizing the industry - then you need to protect it before an industry insider who has the money and systems in place to quickly and cheaply duplicate what you're doing will push you out before you get started.  Not to mention, that unlike trademarks that have to be used properly in order to get and maintain your IP rights, your ability to patent an idea will go away if you wait too long.  So early on, talk to a patent lawyer.  And not just any patent lawyer.  Patent lawyers are like any other kind of engineer.  Software engineers won't be the best people to talk about mechanical inventions.  Electrical engineers won't be the best people to talk about pharmaceutical discoveries.  Find a patent lawyer or firm that has an expertise in the business area first, then evaluate their patent law background.  You'll save a ton of money by not having to explain the basics of the industry before even getting to how your technology is innovative.  As a pro-tip, I also try to look for a patent lawyer that has spent some time in house as well.  It generally means more respect for my budget and more "business talk" to my inventors/management to understand the value of the invention - if there is any.

Then there are the often ignored IP rights, that actually have a tremendous amount of value but are often underappreciated - trade secrets and copyrights.  Unless you're in a content generating business, copyrights get no respect.  But your copyright in your website or source code can often be the most easily enforced right to protect.  You don't have to register them with the copyright office, but if you do you get better damages once you do enforce them.  And you can register them easily, cheaply and without a lawyer using a service such this one from LegalZoom.

Trade secrets can be the most valuable IP right you have - unlike patents, there is no expiration date.  The only catch is that you have to keep them secret!  In order to get injunctions and other types of legal protection afforded to trade secrets you have to proactively take steps to protect your trade secret.  NDAs alone are generally not enough.  Most often you will need physical, technological and legal tools keeping your secrets secret.  A rarely used best practice is to take inventory of your trade secrets annually and evaluate whether the steps you are taking to maintain secrecy are adequate.  Good news is that there's no extra cost in doing this, no lawyers needed.  Bad news is that it never gets done unless driven by counsel or litigation - even in the biggest companies - because it's time consuming and doesn't have an immediate benefit.  But like other annual exams, this one can save you big in the long run.

This concludes my start ups need lawyers series.  If you have a start up legal question I didn't address, drop me a line.  I'll do my best to answer (understanding that neither asking nor answering any questions as a result of this post create an attorney client relationship...) or direct you to someone who can.  If you have multiple questions that haven't been answered, you might consider whether bringing in an in house lawyer earlier rather than later might be the best thing for you.

Start ups need lawyers - Part II, more employment law questions...

Last week I addressed a few of the questions from a few start up HR folks that I know.  There were a few more they'd like addressed:

Moonlighting

FMLA/STD/LTD for small businesses, start ups

And here is where I mildly disappoint them - by telling them what they already know.  Moonlighting, the act of having a second career/job while still employed with your current employer, is not completely unique to the start up culture.  But it may be more prevalent in start ups that can't afford to pay its employees too much cash and opt for equity instead.  A guy's gotta eat, so he's going to get a paycheck somewhere even if he's really bought into building your start up.  There's not much you can do about it from a legal point of view.  Sure, make sure you've got your non-competes and confidentiality agreements in place, but otherwise in the land of the free you can't prohibit an employee from other gainful employment.  What's more important here is how you run your business.  Can you pay enough that your key employees don't feel that they have to work for a paycheck somewhere else?  Does the moonlighting of non-key employees even matter to you?  What can you do to increase satisfaction and meet the basic needs of your employees so that they don't look elsewhere for work?

On the FMLA/STD/LTD for small business question, the answer is "it depends".  Which is why start ups hate lawyers.  Whether you're not planning on adding a lawyer until your 100th employee or until your revenues exceed $20mm annually, you should consult with an employment lawyer on FMLA compliance.  The FMLA (for those who don't know, it's the Family Medical Leave Act), governs a lot of employment interactions although it is most known for protecting the ability of employees to take time off work to care for themselves or a family member.  The extent to which it applies to your small business will depend on a number of factors such as how many employees you have.  You won't be able to find a clear answer on a blog - and if you do, don't trust it!  Another thing to consider is that the FMLA covers federal required leave.  But some states, like California, may require more or different employee protections.  This is one time where you want the individualized interaction with a specialist knowledgeable in the federal and applicable state requirements.  Sorry if that wasn't much help - the best I can do on a blog like this is to say if you need more detail give me a shout and I'll send you a referral who works in your state/area.  

Start ups need lawyers too!

Last week I came across this article from Fast Company about the importance of hiring a lawyer for start ups.  It's a very interesting read. Coincidentally, I also had conversations with several people who happen to work at start ups within the following few days - one of the perks of living in Austin.  This got me thinking about why more start ups don't have in house lawyers and how they address the issues that do arise.  So I went back to my 'start up' peeps and started asking questions.

Most lawyers are risk adverse, and then there are those pesky professional rules that make it difficult to work for a start up with your compensation being primarily based on equity.  That means a start up has to be able to afford a competent attorney before they hire one.  Which will undoubtedly add to the total legal spend as they identify things that really should be reviewed by someone with expertise in that particular area of law.  Even a generalist like me will need to send out patent work, ERISA questions and securities work.  Hire someone with expertise in securities or litigation will save a lot of money when you file your I.P.O. or have to deal with heavy litigation, but you'll end up sending out more of the transactional, basic employment and more basic IP work as well.  So the cost of bringing in someone full time may be prohibitive for many start ups, even though they'd love to have someone on staff that they could ask quick questions of without having to worry about the billable hour.

So what do they do instead?  A lot of times they "wing it".  They'll hire specialists to give them very generalized advice and try to apply to their specific situations over time.  Some hire 'outside GC' firms to do the major stuff for them for a flat fee each month.  And a lot of times they go without, which can lead them into trouble. Unfortunately, usually it is gamble that they have no choice but to make.    So here's my contribution to the start ups, take it with my disclaimer that anything I say is absolutely general statements and does not constitute specific legal advice to you, etc.  You should consult a lawyer for the specifics of your case and realize that the law may vary depending on your jurisdiction.

With the disclaimer out of the way, let's get on with this. I spoke with a friend who handles the HR for an incubator and its related companies.  She has a few issues that come up repeatedly that cause her heartache:

• Employee classification (contract vs employee) risks and benefits of either
• Non-compete/Non-disclosure
• Moonlighting
• FMLA/STD/LTD for small businesses, startups

This post we'll talk about the first two: Employee classifications and the Non-compete/Non-disclosure issues.

Employee Classifications

To keep things simple, we won't get into the different FLSA classifications and determining whether your employees are exempt or non-exempt.  That's a very fact specific exercise and one which you should really hire counsel to do with you at least every couple of years.

The broader and often more relevant question for start ups is whether your worker should be an employee at all or can you engage him as a contractor.  The risk of misclassification carries some pretty expensive consequences. The worker may be entitled to back benefits and overtime pay.  This can add up over time, especially if employees routinely get stock options and contractors don't.  Once your start up hits the big time, those contractors may come looking for a payday.  On the other hand, if you classify someone as a contractor, you can usually pay a slightly hire wage because you aren't having to pay the payroll taxes, health benefits, and other carrying costs associated with having a full time employee.  This is especially beneficial if you're not sure if you'll have the need for that particular worker long term.

Unfortunately, the cost benefits of having contractors vs employees isn't really an important factor that should be considered when making the legal determination of their status.  It basically comes down to the work being done.  How much control do you exercise over the employee?  What type of work are they doing for you?  How long do you expect them to be working for you?  Contractors are better suited to shorter term assignments (under 1 year), with specific outcomes/work product defined, and not too much control over how they accomplish the work product.  If you supply all the tools, determine working hours and working methods, are interested in the body being there as much as the work product produced and expect the work need to be ongoing, you're better off hiring the worker as an employee.  If not, you may wish to engage the worker as a contractor - just make sure you have the appropriate agreements in place and that you don't treat them like an employee.

Non-compete/Non-disclosures

On this one, I'm going to do the typical lawyer thing and answer all related questions with "It depends".  The enforceability of non-compete agreements vary greatly by jurisdiction and even within a favorable jurisdiction like Texas, you have your work cut out for you.  The short, generalized answer is that all non-competes should be very narrowly tailored, focused on addressing real harm to your business and be accompanied by some sort of compensation.  The longer answer is that you should really consider who within your organization needs to be bound by a non-compete.  Would a non-disclosure or non-solicit be a better vehicle to protect your needs?  Does your receptionist pose a real risk to your business should she go to the dark side and work for a competitor?  Have you given sufficient consideration in exchange for the promise not to compete?  Are there any public policy or other reasons why an otherwise valid non-compete may be rejected by the courts?  Would you really spend the money trying to enforce a non-compete?  It's a pretty fact specific exercise that you should think about very carefully before adopting a one size fits all policy.

A much easier question is the non-disclosure.  I firmly believe that all employees of all ranks and any vendor (including contractors) that has access to any of your information should have non-disclosure agreements signed on the first day before they're allowed to login to your computer systems.  For some high level, strategic positions, you may consider having candidates interviewing for the position sign non-disclosures as well - especially if the interview process will lead to possible disclosure of confidential information.

Next post we'll go over some of the headaches associated with moonlighting and FMLA issues for start ups.  In the meantime, feel free to add your two cents about the start up world in the comments.