RIAA to AllOfMP3: Show Me the Money!!

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Interesting article in TechCrunch about how AllOfMP3 told the RIAA to get lost when it filed its $1,650,000,000,000 (yes, you did read that figure right – its in the trillions) claim in New York against AllOfMP3, even though AllOfMP3 operates out of Russia. From a legal perspective one would typically launch into the complexities of jurisdiction, judicial comity, real and substantial connection, forum non conveniens, blah, blah, blah.

But since this is a personal blog, let’s focus on the fun part, shall we? Let’s focus on the CASH. Woohoo! Fun with numbers. OK, so, let’s see. Accordingly to the CIA World Factbook, the current population of the world is 6,525,170,264. So, if the the damages sought by the RIAA were evenly divided amongst every man, woman and child, each one of them could go out and buy, oh, about twenty CDs, give or take. Wow. That’s a lot of CDs.

Another way to look at it? Its bigger than the GDP of every country in the world except for roughly the top ten. Yes yes, figures are few years old. Fine. Call it 15. You get the point. In any event, around the ballpark GDP for all of Russia. Yes, including the little nesting doll thingies.
From a more personal perspective, the interest on that amount, calculated at the low, low US fed rate for the shockingly painful period of time of two minutes is quite just a bit more than the combined annual incomes of me, my wife, my mom, stepmom, dad, sister, and her husband make in a year.
The point? Just that its a lot of money. A LOT of money. Not exactly googol or a googolplex

(which, as you probably know, is how Google got its name:

The Internet search engine Google was named after this number. Larry Page, one of the founders, was fascinated with mathematics and ‘Googol’, even during high school. They ended up with ‘Google’ due to a spelling mistake on a cheque that investors wrote to the founders.

(from Wikipedia)) but still a lot of money.

Update:  Further news from the INQ – apparently they calcuated damages at US$150,000 per song. Though the INQ correctly observes that AllOfMP3 hasn’t made that much money, damages could also be measured not by what an infringer has made (or an “accounting of profits”) but also the harm that they’ve cost you – so if AllOfMP3 sold each song for a penny, while the RIAA members would have otherwise sold the same song for a buck, multiply that by 150,000 downloads and you have your damages, as that is what they’ve lost out.

Were You Once a Brobeck Client?

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Very interesting post on TechCrunch on how the digital records of law firm Brobeck, Phleger & Harrison, for some 10,000 clients, will be preserved and made available to a limited group of scholars and researchers, through what will be called the Brobeck Closed Archive.
Wow. At first blush I had the same reaction as Michael Arrington (the TechCrunch guy) and the guy who wrote the original article that he cited. But if you read through the FAQ at the sight, as well as the comments that the professor who is running the thing posted on TechCrunch, its pretty clear that they’re not going to be displaying lawyer-client documents on a website for all to see – there will be some measure of protection put into place.

That being said, though I certainly understand the historical significance of these records, and the objectives of the archive (which seem entirely noble) I get a bad feeling about this generally – you know, kind of like that little tickle at the back of your throat that almost, but not quite, wants to make you cough. Heck, if I were a client of a law firm, would I want anyone looking at my counsel’s records on me? Even if it were a researcher? Even under NDA? And even with restrictions? Well, no, I don’t think so. Not at all. Its not any researcher’s business – not at all. So sure, maybe as an opt in program, if the client consents, but otherwise, even, I think, where a corporate client no longer exists to approve disclosure, the records should also do the same.

So, if you were once a Brobeck client, and haven’t seen the notice, you might want to get in touch with the archive.

Interested in Pitching to a Bunch of Real VCs?

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Are you an entrepreneur? Do you have a really, really neat business? Are you at the stage where you’re close to looking, or actively looking for venture capital financing? Would you like the chance to polish your pitch? Would you like to get the opportunity to get feedback on it from six of the leading venture capital firms in Canada? Would you also like to get help with your pitch and selling your company to VCs from some of the best and brightest MBA students in Canada (and some from the US as well)?

What if I were to tell you that you could get all of this – and more – for free, other than perhaps a full day of your time, and perhaps some time to prepare? And yes, I know I sound like I’m selling diet pills on late night TV. But I’m not.

What I’m describing is a competition called the Venture Capital Investment Competition. It was started in the US a few years ago by a brilliant prof by the name of Patrick Vernon. Designed primarily as an educational activity to help MBA students learn about VCs and what they do, it also has had some great side-effects. Following is an excerpt from the VCIC site:

At the core of the event is a creative turn of the tables. Unlike business plan competitions in which students pitch their own ideas to investors, at VCIC the students are the investors, and real entrepreneurs pitch to them. It is a very powerful learning experience for both parties. Add to the mix a dozen VC judges, and you have what the VCIC website describes as a “win-win-win.” Students learn (and win cash), entrepreneurs connect with investors and VCs get an early peek at some viable deals. How viable? Last year, one-third of the entrepreneurs (11 out of 33) pitching at VCIC went on to raise $30M in venture capital VCIC. Of the 200 entrepreneurs who have pitched at VCIC regional events since 1998, 40 have gone on to raise $300M. That is a hit rate of 20%, remarkable considering that most of these events occurred post-bubble, including a dismal one-out-of-30 in 2002. With an overall rate of 20%, and the recent 33% mark, VCIC is headed back towards its pre-bubble hit rate of 50% in ’98 and ’99.

The organizers of VCIC are quick to point out that the mission of the program is educational, not commercial, and none of the deals are known to have been initiated at a VCIC event. “We’re not in the business of playing dealmaker,” comments VCIC director Patrick Vernon from UNC’s Kenan-Flagler Business School. “We are focused on teaching students about financing new ventures, and the most effective way to do that is to expose them to the best deals and investors. Lucky for us, the best entrepreneurs and VCs like to meet each other, too.”

And the students also like meeting the VCs. Many of the competitors aspire to become venture capitalists, a dream that is difficult if not impossible to fulfill. Nonetheless, quite a few have achieved it. Six VCIC alumni have gone on to participate in the prestigious Kauffman Fellows Program, working in VC firms from Silicon Valley to Munich, Germany. A dozen VCIC alumni working in VC, headed by Don Herzog from the 2000 Carnegie Mellon championship team, organized a new alumni prize money fund in 2006, then came to the finals to deliver the 2nd place prize money check. “I have been back to judge the finals every year since I competed as a student,” commented Herzog, who currently works at Bluegrass Growth Fund. VCIC has even had individuals play all three roles in different years: competed one year as a student, got a job at a VC firm and returned as a judge, then went on to start a new company and came back to pitch. (For the record, it is most fun being a judge.)

What began as an experiment in 1998 at UNC in response to the bubble of business plan competitions popping up at most business schools, VCIC has grown into a virtual venture job fair and marketplace. In 2007 the program will include ten regional and 30 single-school events in North America, Europe and Asia. World-wide, 50 top business schools will participate. The program culminates every April in Chapel Hill, NC, with the International Finals, where the winning team takes home $10,000 in prize money. This year’s finals will include a special 10th anniversary celebration that will be attended by many former students, VC judges and entrepreneurs.

I am very proud to say that McCarthy Tétrault, the firm I work at, was one of the primary sponsors of the first VCIC competition in Canada last year. Held in Toronto at the University of Toronto’s Joseph L. Rotman School of Management, it was considered a great success. I was fortunate enough to have stumbled onto an article describing VCIC and got in touch with Pat Vernon to help facilitate the inaugural event in Canada (though it was really one of my partners – Ian Palm – whose support and ties with the VC community were instrumental in making the event a success).

We expect this year to be another rousing success, and have put most of the pieces into place, including the participating schools, lining up VC judges, and organizing the event. However, what remains is finding three real-life entrepreneurs who are willing to participate. The event is scheduled to take place on February 16, 2006. Fit the profile? Interested? If so, feel free to get in touch with me at dma[at]mccarthy.ca. Unfortunately, due to time constraints the event can only accommodate three entrepreneurs so no guarantees that you will be selected to participate, but hey, doesn’t hurt to check…

A Public Private Stock Market

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This is pretty neat. The Genesis Exchange calls itself a “private equity exchange”. Sort of like a platform where private companies can issue securities, and investors can buy them, presumably under applicable registration and prospectus exemption rules. That being said, it seems to be less a trading platform than it is an introduction and screening system of sorts. Companies who want to raise funds complete a profile through which their “Genesis Score” is calculated. Angel investors then set a minimum score and only receive info about companies with scores above that.

Not necessarily a new concept (other than perhaps the Genesis Score) but of course could be useful nonetheless. That being said, I’m not necessarily sure how well this score thing would work – I mean, it certainly could, but I have my doubts about whether any model can simply boil a business down to number that is used to screen – if that were the case, then you’d likely see a lot of VCs exiting the industry fairly quickly.

Certainly worthwhile investigating, though of course anyone looking for private equity dollars should also of course look into things like the Toronto Venture Group (as well as the Toronto Angel Group) which try to do the same thing in meatspace and without a one number score…

Technology Breakfasts

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The Toronto Board of Trade has been organizing these great events focused primarily on the Information and Communications Technology sector. The next one will be coming up will be an ICT Forum with Accenture on Wednesday, January 31, 2007.

A brief description:

The Toronto Board of Trade is pleased to present Bill Morris, Country Managing Director, Accenture, as our next featured speaker for our Technology Innovators Series, a showcase for Toronto’s Information and Communications Technology (ICT) community.

Bill will highlight outstanding Canadian and international ICT performers and will provide his insight on what it takes to succeed in an intensely competitive and consolidated marketplace. He will share his forecast for the next wave of technology and discuss Accenture’s findings from a global study, encompassing over 6,000 companies, focused on high performance business and high performance information technology.

Bill is responsible for driving the growth of Accenture’s business consulting, systems integration and technology as well as outsourcing businesses across all industries and governments. He has more than 24 years of experience working on technology consulting, business transformation and outsourcing initiatives.

Also taking part in the panel discussion will be Phil Sorgen, President of Microsoft Canada. Phil joined Microsoft Canada as President in January 2006 after a 10-year career with Microsoft Corp. in the United States. Phil is responsible for all elements of Microsoft Canada’s business and for deepening the company’s commitment to this country.

Networking will take place from 7:30 a.m. – 8:00 a.m. and there are no ties required!

Register at the Toronto Board of Trade Website. Well worth it.

Don’t Say What You Don’t Mean

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Oddly enough I’ve received a few calls all on the same topic recently. Though the facts generally differ, the situations basically all involve negotiations regarding a deal of one sort or another, where my guy is either talking or e-mailing someone about the business terms of a deal. In some cases, its been clearly stated that there will be a written agreement that will be signed to put the deal in place, in others, this isn’t the case (though it could be argued that that was the understanding). Then, in each case, something goes off the tracks and my guy decides he doesn’t want to go through with the deal. And then, in response, the other side makes rumblings about having a deal, and breach, and lawsuits… which is about the time my phone rings.

So what’s the deal with situations like this? Can you form a binding contract through an exchange of e-mails, or even through a simple phone call or discussion? Absolutely. There’s nothing preventing two people from forming a contract through e-mails or oral discussions. There are a few exceptions (e.g. real estate, other statutory things) but generally if you say “We have a deal” then, my friend, you better be prepared to live with it.

Even scarier is the fact that this can still be the case even if both of you refer to a written agreement that will be drawn up later. There have been cases in the past where the courts have found that the business folks were in agreement on all the major business points, and that the signing of a written contract later on was a mere formality, and was not required in order to have a binding contract. So, if you go back and forth on e-mails and hammer out prices, scope of services, term, etc. and then say that you have a deal to the other side, and you just need to hand it over to the lawyers to get it papered, well, you may already have yourself a binding contract, whether or not you actually want it, or decide you don’t want it later on.

The moral of the story? If you want to make absolutely sure you don’t have a binding contract until you have a real contract signed by both you and the other side, make sure that’s what you say – “We don’t have any obligation or contract until our lawyers finish the paper and we sign it.” Or say its conditional on agreeing to a definitive agreement. Or that everything is non-binding until you sign an agreement. Don’t say “we have a deal” or “agreed” or anything like that. Because if you do, that’s exactly what you’ll have. And then if you don’t want to go ahead, well, you’ll likely be calling me, or another lawyer.

Editorial comment: It always surprises me that these situations result in rumblings of lawsuits, etc. Very often, the rumblings are from a rather pissed off business person who has spent a fair bit of time on a deal that has fallen through. Most people will understand that even if someone says in an e-mail or conversation that they have a deal, that some kind of paper will need to be signed. And if that hasn’t happened, there are likely good reasons and it will likely be an unpleasant transaction if it actually starts off with one guy suing the other. For this reason, its rare that a situation like this will end up with someone actually suing someone else. That being said, if the stakes are high enough, it will happen. And it has happened (which is why there is case law on the subject). So why take the risk?