The last fresh tomatoes of the season were greatly enjoyed (typically, we have fresh tomatoes in the fridge ’til early December, but this year’s weather was crazy, so we have to call an end to the season earlier than normal, sad as it is).

Apologies on the light posting, in general. It turns out, legal work subject to confidentiality obligations makes for bad blog fodder — and, I am blessed to have more legal work than I can handle.

But rest assured. The Tech. The Law. The Garden. They are all my continued passions. And I’m enjoying and interested in following and influencing how all of them are playing out in today’s world.

If there’s one topic that’s guaranteed to make my clients’ eyes glaze over, it’s indemnities. My clients will fight to the death regarding the business points that they believe are important. But, often, by the time we get to Section 18 on page 13, they’re ready to mentally check out of the conference call and leave the lawyers to fight about the legalese.

From a legal fee standpoint, this isn’t a great idea — Lawyers can fight all day about just about anything, but especially about indemnities, because, truly, they’re just risk shifting. There is no “right” or “wrong.”

Just think of an indemnity as insurance, without a premium — Great to have one in your favor, not so great to be offering one to the other party.

When someone says, “You should indemnify us for all claims related to your breach, or your negligence” what they’re really saying is, “I don’t want to have to prove that you were in breach or that you were negligent. If it looks like you might be, I want you to be on the hook. And, I don’t want you to have any defenses or arguments about why it’s not your fault or problem.”

Here’s a hypothetical example:

Startup is running a software as a service and offers access to their service via an API. Big Company wants to wrap the API’s functionality into their product or service and offer it to their end users.

The indemnity issues *really* matter:

1. Who should be on the hook if the end users breach the end user terms of service? (e.g. what if the end users break the law? Shouldn’t that be the end users’ problem? Does it make sense to have one company responsible for all legal costs and damages associated with end users’ actions? If so, which company? Big Company will try to make certain it is Startup.)

2. Who should be on the hook for a patent lawsuit regarding the combination of the API’s functionality with the other side’s functionality? (In the absence of an indemnity, the liability would be shared. But Big Company’s default form will try to make it entirely Startup’s issue.)

3. Who should be on the hook for changes in the law that require changes to the software/service? (Again, this is an ordinary risk of doing business that all companies face. But Big Company will try to push the entirety of this risk and all associated costs on to Startup.)

The biggest issue with an indemnity, however, is that unless drafted narrowly, it will cover *all* claims, regardless of their value. So, if a malicious, false, and/or vindictive claim is filed, the indemnifying party is still on the hook. An indemitor can end up insuring against the defense and settlement of claims filed by the indemnitee’s enemies or folks looking to go after deep pockets for a quick settlement.

As a final risk, many General Liability insurance policies explicitly carve out indemnity obligations from “insured contracts.” I always advise my clients to check with their insurance brokers to find out if they are accepting un-insured liability by taking on an indemnity obligation. At a minimum, the increased premiums required to accept such a clause (if you can get coverage) can be a useful bargaining chip when discussing whether an indemnity is “standard” or “required” or “normal.”

I’m in London, finishing up a European vacation with a visit to a couple of clients for work before heading back to Silicon Valley.

Today, one client’s CEO showed me around and introduced me to one of the tech guys. After shaking my hand, one of them immediately enlarged the newest open source license he wanted to get approved for his project:

The Do What the Fuck You Want License.

I had never encountered this license in the past and was a little flabbergasted to encounter it on-site on-screen for immediate approval.

I am happy to report, I managed to maintain some semblance of composure and let them know that for this particular client’s needs, this license was acceptable.

Also, I immediately went back to my hotel and looked up the history, as I couldn’t believe that this license was already on Version 2.0 after only a decade or so… The GPL is only on 3.0 after 23+ years!

Wow!  That was fast.

I”ve been running my own law firm for over a year.  It’s been a blast and I’ve been very fortunate — quite a bit of exciting and interesting work came to my door last year.

Some of the highlights include:

• Managing a dispute from initial demand letter to arbitration award — on my first day running my own firm, one of my clients received a cease and desist letter which we believed was invalid.  We pitched the case to litigators, hired them, and I was able to act as in-house counsel for the 7 month JAMS arbitration: editing and adding factual clarity to filings, attending all depositions and hearings, and eventually delivering the news after judgment.  In general, this is not my day-to-day practice, but it was very educational and modified my perspective on how contracts should be drafted and disputes relating to contracts should be approached.
• Acting as on-site in-house technology counsel one day a week — sitting in the legal department of one of my larger clients gave me a very different understanding of the role that attorneys play within an organization.  I supported the third party inputs to software (reviewing both open source and third party proprietary licenses) and the enterprise licensing division and often witnessed first-hand the delicate balance that must be maintained between legal risk and business risk within a corporation.
• Negotiating against the big guys — it’s part of the typical start-up experience.  Sure, you often negotiate and partner with other start-ups, but at some point, you will need something from one of the big established players.  It may just be Internet connectivity.  Or, large companies may be your sales targets.  Regardless, negotiating against a large company who insists that *we never change our forms*,  *everyone signs this without edits* and *this is completely standard* requires the expertise of someone who has seen many *standard* offerings in the applicable industry.  Over the years, I’ve dealt with Fortune 100 and Fortune 1000 companies in almost every industry, and this year was no exception.  Examples from this year include: Advertising Agencies, Amazon, Barclays, Blue Cross Blue Shield (of America and of various States), Bank of America, Chubb, Credit Suisse, CUNA Mutual Insurance, Discover, DOE Pacific, Earnst and Young, Experian, Facebook, Fidelity, Google, Honeywell, Horace Mann, Humana, JP Morgan Chase, KPMG, Lloyds, Lockheed Martin, Mass Mutual, Microsoft, Morgan Stanley, NBC Universal, Nationwide, PWC, Safeway, Samsung, State Farm, T-Mobile, Toys R US, Viacom, Walmart, and Warner Brothers.
• Setting up the legal side of the business (forms) — a large portion of my job is limiting the amount of work I do.  I try to get my start-up companies into a position where their internal IP creation departments, online systems, sales forces, and business development teams can function with minimal legal input.  This involves an up-front investment of time to create forms that are correct for their business models.  I talk to my clients and truly understand their businesses before drafting, which avoids the extra legal fees companies often incur when their attorney starts with a square hole for a round peg.  Examples include:  Enterprise license agreements, Software-as-a-Service Agreements, trademark license agreements (branding/endorsement/certification programs), software development agreements, click-throughs (standard terms, privacy policies, API license agreements, payment obligations, revenue share, and more), commission agreements, reseller agreements, professional services agreements, master purchase agreements, NDAs, partner program agreements and technology assignment agreements.
• Open Source — I went to law school because I was fascinated by the legal rights issues in Open Source Software.  I even wrote an award winning student note on the topic.  This year, I continued my commitment to Open Source legal issues with projects in several areas:  (i) aided a client in cleanly open sourcing a proprietary language they had developed (open source license evaluation and selection, branding issues, IP contribution agreements); (ii) performed open source audits of client codebases with the engineering teams and cleaned up any issues found; (iii) acted as special open source counsel in an Asset Purchase and Leveraged Buy-Out to help the acquirors become comfortable with the state of my clients’ open source uses; (iv) represented (and continue to represent) two clients whose business models are built around open source software projects that they manage (with monetization through professional services, support, maintenance, priority bug fixes, and bespoke development); (v) aided clients in the development of open source policies and approval processes to maintain the codebase in the proper state.
• Everyday advice, counseling and communications — this catch all category is where the most surprises come.  Sometimes it’s just a phone call asking for a sanity check — Can we do this?  But sometimes there are more exciting issues such as requests from law enforcement, lawsuits that have been filed against clients, high level discussions about IP strategy (should we talk to patent counsel?  Should we file a TM?), letters hinting that lawsuits may be filed, formal letter writing in response to unfortunate situations, termination of contracts, privacy concerns, and much more.

Overall, last year was a great year full of good work, great learning opportunities and wonderful clients.  I can’t wait to see what this year brings.

Occasionally, a client calls me to tell me that the other side’s lawyer reached out directly to them and wants to have a quick direct conversation to discuss the outstanding issues.

In California, Rule 2-100 of the Professional Conduct Rules says that a lawyer may not speak with the opposing party directly (if the opposing party has counsel) without getting the opposing party’s lawyer’s consent.

ABA Rule 4.2 says roughly the same thing.

In litigation or active disputes, this rule is almost always scrupulously observed. But in business deals, where things are less contentious, sometimes people forget.

So, in short, no, if their business folks decide it’s time to bring in their lawyer, you don’t have to take the call without your own lawyer to back you up. The other side’s lawyer can talk to you, but only if you (and your lawyer) consent.