Pretexting, Ethics and Clients

Still catching up a bit – very quick post on the HP “pretexting” thing. As you may recall, HP asserted that its practice of pretexting – i.e. pretending to be someone else to get confidential telephone records – was legal. They were investigated leaks to the press by one of their board members and had resorted to this practice to try and find the leak. I had commented elsewhere long ago when this story first broke that even if it were illegal, very few (if anyone) could consider such actions the least bit ethical.

As most of you know apparently there was some disagreement as to legality and a few folks at HP were charged. Then I read this recent story about how HP was ending its special ties to Larry Sonsini, of the California powerhouse firm of Wilson Sonsini:

Sonsini – famous for decades in these parts – gained national fame in September during HP’s spy scandal hearings in front of Congress. Emails between the lawyer, HP executives and former director Tom Perkins raised serious questions about how sound Sonsini’s advice was around the practice of pretexting. He seemed to indicate that phone record fraud sounded like fair game, after being nudged in that direction by HP’s internal lawyers.

My emphasis. Its unfortunate to hear of something like this. I don’t doubt that he took the time and effort to research the law to come to a reasonable opinion on the matter before advising his client – obviously it was a very grey area of the law. In those circumstances its unfortunate that he didn’t perhaps suggest, notwithstanding the black letter of the law, that it would be unwise do take the course of action they were contemplating. That as good corporate citizens with a significant public profile, that such a practice is not something they should even consider. But then again, maybe he did and they didn’t listen (and of course he would surely have the good sense never to say that in public and embarrass a major client) or maybe he thought that such comments were not for legal counsel to make. Who knows.

The situation is not unfamiliar to many lawyers – particularly when it comes to giving opinions – lawyers are sometimes subjected to pressure to deliver the opinion that a client wants to hear rather than the one they should probably be delivering. By this I’m certainly not suggesting lawyers are delivering bad or incorrect opinions. What I am saying is that there are often grey areas of the law (which tend to be the areas on which legal expertise are sought) and in respect of which opinions can go one of two or more ways. And sometimes, the client will want to hear a certain outcome – for example, in the case of HP, I’m sure they would have liked the comfort to hear from their external counsel that their actions were legal – it would serve as some evidence that they took some degree of diligence and could serve to mitigate consequences if it turned out governmental authorities differed. If he, on the other hand, refused, or proffered a legal opinion that it was fine but qualified with a recommendation not to take such actions, HP likely would have not been very happy with him. And everyone knows what happens when clients aren’t happy.

Its an unfortunate situation to be in. Particuarly in this case, where, at the end of the day, HP still, obviously, isn’t happy with him.

Kinderstart v. Google

Speaking of litigation, here’s another one, albeit rather old news. The short version: Kinderstart, a web startup focused on children, decides to sue Google because its PageRank drops when Google decides to fine tune its PageRank algorithms. PageRank, btw, is what determines where your site shows up in search results when someone searches on key terms in Google. So when your PageRank drops, less people see the link to your site, less people find your site, and therefore your traffic and revenue go down.

Because of this, they sued Google for damages and also sought an injunction to require Google to reveal their proprietary PageRank algorithms (which of course Google closely guards as a trade secret.

As with the Culligan case, yes, well written decision, etc. etc., and I understand the logic and all that, but there’s a little part of me that wishes that the court could have written a judgement like this:

Kinderstart, this is Google. Google is a separate business from yours. They don’t owe you a living. So, in response to your claim, the answer is no. Now go away.

Tip o’ the hat to the Stella Awards for mentioning this in their listserv. Highly recommended for their take on US litigation.

Valuation of Flies

One of the great things about working in a large firm is the sheer depth of expertise and knowledge. As an example, a recent case came out and was analyzed in short order by the folks in our litigation group, which discussed an interesting interpretation liability for negligence.

The first three paragraphs sum it up rather nicely:

[1] The Mustaphas maintain a spotless home. Cleanliness and hygiene are matters of utmost importance to them. On November 21, 2001, an incident occurred that offended their sense of sanctity in the purity of their home, and shattered Mr. Mustapha’s life. In the course of replacing an empty bottle of Culligan water on the dispenser provided by Culligan, he and his wife saw a dead fly, and part of another dead fly, in the fresh, unopened, replacement bottle.

[2] Neither Mr. Mustapha nor any member of his family drank from the bottle. He became obsessed, however, with thoughts about the dead fly in the water and about the potential implications for his family’s health of their having possibly been drinking unpurified water supplied in the past.

[3] The trial judge accepted the medical evidence that Mr. Mustapha suffers from a major depressive disorder, with associated phobia and anxiety – all triggered by the fly-in-the-bottle incident. In the result, Mr. Mustapha recovered judgment at trial in the total amount of $341,775, plus pre-judgment interest, for psychiatric injuries suffered because of the incident.

My emphasis. The decision goes on for many, many more paragraphs to ultimately overturn the judgement and absolve Culligan of liability. Its a well thought out judgement with cogent arguments supporting the conclusion.

All that being said, even as a lawyer, sometimes I read certain cases, such as this one, and wonder whether judges ever wish they could write a judgement more along these lines:

C’mon Mr. Mustapha. Its a fly. OK, a fly and a half. It didn’t kill you. It wouldn’t have killed you. Get over it. Fine, you freaked out. And I probably would also be a bit upset. But really, destroying your life? $341,000 in damages? No, the damages aren’t from the fly, they’re from you. So forget it. Not today. Not in my court. Appeal allowed. Good day.

Yes, I have my tongue firmly in cheek and yes, definitely, I understand the need for lengthy and well-reasoned judgements, etc. But sometimes, just sometimes, I scratch my head a bit and wonder what the world would be like…

Venture Capital Valuations

OK I lied – just a few quick posts since its been so long and I need a break from drafting.

For all of you out there looking to value your 2.0 startups go take a look at Bubbleprice. An amazingly sophisticated set of proprietary algorithms developed by industry veterans allows you to input primary and secondary valuation factors used by those in the industry to give a precise indication of economic value. Fascinating, fascinating technology.

An example can be found below:

In fact, I’d be happy to take a half of that. Or a third. Even a tenth.

Not Dead

Wow. The online world is tough. A few days of absence and readers drop to nil. Alas, tough to be a good lawyer, a non-absentee parent and a regular blogger at the same time. So when push comes to shove, the law comes first (since the boy doesn’t eat if it doesn’t). Things have been busy and I have a long backlog of somewhat interesting stuff to share with you – shortly.

Apples and Oranges and Mobile Phones

This won’t be long and has no legal bent to it and you’ve probably already seen it elsewhere, but if you haven’t, you really should take a look.

When the iPod came out, I though “meh” – its OK. Not great. Just OK. Of course, as everyone knows, it did very well.

On the other hand, the new iPhone? Wow. Stunning. Remarkable. I can’t imagine how this thing will *not* fly off the shelves.

After all the particularly bad attempts at doing this in the past, finally, someone got it right.  Sure, its not absolute perfection, but it comes pretty close.
My humble opinion? Unless some major disaster happens with it (like it doesn’t work as described, or breaks when you drop it, etc.), iPhone will make the iPod look like a wee, tiny drop in the bucket.
Live from Macworld 2007: Steve Jobs keynote – Engadget

Microsoft Patents RSS. Or Tries To. Maybe.

Interesting post on someone else’s blog about Microsoft apparently trying to patent RSS:

The applications, filed last June but just made public yesterday, cover subscribing and discovering what Microsoft calls “Web feeds.” That comes as a bit of a shock to anyone who’s been working on RSS, which has its origins in a format developed seven years ago at Netscape Communications.

Microsoft executive Don Dodge, while not involved in the patent applications, says he suspects the filings were made to defend the company against “patent trolls”. (The filings were made shortly before Microsoft announced plans to build RSS technology into its upcoming Vista operating system.) Still, if granted, the patents would give Microsoft a legal cudgel to wield against other companies using RSS.

Well. They do have a point. Generally speaking, I don’t think patent trolls (those that basically file overly broad patents and then sit on them in a dark cave until someone who actually does something useful, and therefore has deep pockets, unwittingly infringes, at which point the troll comes out and clubs them over the head with a lawsuit or settlement) are a good thing. That being said, its ironic that Microsoft feels the need to abuse the system in the same way as patent trolls in order to proactively defend itself. It will be interesting to see how things turn out.

Unfortunately, I’m not necesarily sure that prior art would necessarily invalidate these patents – after all, most of NTP’s patents were more or less considered invalid, but that didn’t stop them from collecting several hundred million from RIM. And its not like there haven’t been other, um, rather broad patents asserted in the past. You know, like back in 2002, when British Telecom asserted ownership of hyperlinks (which they lost) though of course BT doesn’t quite fit the description of a patent troll.

Then again, it begs the question as to who or what should or shouldn’t be considered a patent troll – for example, its well known that IBM has a huge, gigantic, enormous arsenal of patents at its disposal. IBM also actively licenses these patents (and of course threatens litigation where it believes its rights are being violated), but it isn’t necessarily the case that IBM would otherwise have exploited these patents in what I’ll call “active” business – i.e. making and selling something based on the patent as opposed to primarily seeking royalties and licenses from those do – even though IBM does do so in some cases. So does that make IBM a patent troll? What about Philo T. Farnsworth who, arguably, never started producing televisions but instead sought legal claims against others?

My perhaps overly simplistic take on this is that patent trolls are not inherently the problem, but rather the ability, primarily in the US, to register patents that should have never issued in the first place. If someone comes up with a smart, cool, inventive, and truly novel way of doing something, then they should certainly be free to either produce something with it, or sue the living daylights out of someone else who comes along and infringes the IP even if they don’t (or can’t) make productive use of it themselves. Not actively exploiting a patent is not necessarily tantamount to being a bad guy, IMHO.

It will be interesting to see what happens on this front, if anything. If nothing does, then I may well turn to drafting patents, the first being “Method of Utilizing a Rhythmic Cadence in the Expansion and Contraction of Multiple Muscular Groupings to Faciliate Indefinite Continuation of Metabolism of Cell Structures.” I like the sound of that. Yes indeed.

When is a “Blog” not a Blog?

Interesting piece in the Inquirer about the use of the term “blogs” – just like the British to get picky about nomenclature. To wit:

ENOUGH WITH CALLING every site on the (#*&$ing net a blog, people! I know the mass media is filled with dumb sheep that need to spread fear about anacondas in toilets to get ratings, but this has gone too far. What am I talking about? It seems every site that puts up content that is not owned by a major media outlet that has a TV channel is now blogging.

The INQ is a blog, Boing Boing is a blog, and just about every site is a blog. Does it matter what the content is, or how many people work for it? Heck no, it is a blog because talking about blogs make the media worms seem hip, cool, and most importantly not as stupid as they really are. Hint, they are that dumb.

OK, fair enough, so the rule is?….

A single person writing about their experiences, thoughs, or research, no matter how many hits it gets, definitely a blog. Once money and a staff get involved, it loses its blog status and becomes a site.

Don’t know if I’d agree, not that it matters. I think one of the key distinguishing factors of a “blog” is its tone – a bit more off the cuff, more casual, more observational, more frank, etc. etc. – a little more honest – whether or not someone is making money at it or not. Probably not as precise as the folks at The Inquirer but just my $0.02. Least I’m safe for now. Then again, if suddenly I get a million pageviews a day and actually start making making money from this thing hand over fist (which btw isn’t really the point of this blog), I doubt I’d actually care what they call it. And likely neither to Boing Boing et al.

Of Search Engines and Competition

Interesting post on the Wellington Financial blog. In short, sounds like they think the success of a new vc financed search engine hakia is unlikely to be around very long. An excerpt.

But it really isn’t clear why the rest of us will rip out the Google toolbars or Yahoo Finance pages and convert to another aggregator. Well, maybe we could stand t dump Yahoo Finance.

Youtube, flickr and the like were serving a need. There’s no obvious need for a better search engine. And if there is, Google has proven that they have a few billion to invest on improvements and the currency to acquire along the way.

imho the better question would be why not? changing a search engine is about as hard as changing your undies – either type it in or change your homepage. why even bother with a toolbar? no idea about hakia but i do remember yahoo, altavista, hotbot and a couple of other engines that were at one time or another at the top of the heap.

relatively speaking, in terms of switching costs from the user perspective a search engine isn’t close to most other things (e.g. operating system, office applications, etc.).

and sure, google has lots of coin. but at one point it didn’t. and there wasn’t exactly an absence of search engines when they popped up…

will it be a success? no idea. could it? why not? I’d certainly use it if it’s better than google.

BTW, in case someone from WF is reading this here, tried leaving a comment, couldn’t as your captcha doesn’t seem to be working and PS you might want to try hashcash instead.

Update: and its not like Google hasn’t had its fair share of troubles lately.

Giles Bowkett: A Tale of Two Startups

Came across this article through reddit from Giles Bowkett, an entrepreneur type in the US. Interesting in the conclusion on VCs:

The irony is, the biggest disruptive innovation that ever came from the Internet could in fact be open source software, and the old industry it destroys will probably be venture capital.Think about it. Free software and cheap infrastructure basically eliminates the whole raison d’etre for venture capitalists. Companies are cheap to start. All the stuff you used to need millions for is now free. That means venture capitalists just don’t matter any more. It isn’t about being lucky enough to get $5 million in funding; it’s about starting something with the cash in your pocket. If you make something and it’s good enough, the guys with $5 million in funding will come to you, because those guys are basically just money in search of intelligence, and it’s a lot better to be intelligence in search of money. If you’re intelligence in search of money, you’ll choose the best way to get money. The best way to get money isn’t to find some VCs to beg, borrow, or steal from; the best way to get money is to make something people will pay for. So if you’re intelligence in search of money, you’ll make stuff people want to pay for, and you won’t even bother with the VCs, because they need you more than you need them.

My own, personal take? Fat chance. Yes yes, free software is nice and so is cheap bandwidth. But the world runs on money. People cost money. Development costs money. Money money money money. So fine, you’re a super ultratalented uber-geek that shows leadership skills, blah blah blah. Still need to create the thing that people will want to pay for. And unless you’re going to be coding everything yourself, you’ll need to hire people to help you. And you’ll need to pay the accountants to pay the bills. And the lawyers to draft the agreements. And the admin guys to, uh, do the admin. Its not as if a magic sprinkle of open source will all of a sudden obviate the need to invest to build a product – if that were the case, then absence of barriers to entry would quickly reduce what was otherwise a very profitable niche into one that looks less and less desirable – both to entrepreneurs as well as investors, be they VCs or others. And even in the case of two folks setting up shop – Company A who chooses the cheap route, builds a really neat widget (but of course doesn’t have the budget for marketing, promo, etc.) vs. Company B who gets a $10 million first round, uses to ramp up and gets to market in 1/2 the time, establishes critical mass, and basically kills off Company A. Hmmm.
I also don’t agree with the “they need you more than you need them” thing – VC money, as with most things in business, are driven by the market – more VCs chasing fewer opportunities just means the cost of their money will come down, not that they will disappear.

So, long story short, I doubt tech VCs will go away any time soon. Besides, they’re fun guys.