I read a Guy Kawasaki blog post this week where he walked through six reasons why an abundance of capital can hurt an early stage business. In my entreprenurial law / funding law practice I work with a lot of business owners through capital strategies and the private equity processes. Honestly, the drafting of a private placement memorandum is the easy part of my practice. The hard part is creating the proper capital structure for the long term growth and success and reaching investors who want to invest in the business.
Here is one of the points from the post:
Expenses expand to the level of funding.
Funny how this works: companies create projections that use the money that they have. The availability of money makes them think of ways to spend it, so there’s less emphasis on doing the right things the right way. The logic becomes, “Our investors gave us this money to invest, not to collect interest in the bank. They want us to scale up and go for it, so we should spend it. We know we’ll meet our milestones, and our competition is a joke, so we’ll always be able to get more money.”
There is a great article in the July-August edition of the Harvard Business Review entitled The Early Bird Really Does Get the Worm. The article summarizes a study which found a correlation between "morning people" and career success. This is based on a number of traits which are commonly found in morning people.
Traits Agreeable Optimistic Stable Proactive Conscientious Satisfied with Life
Being a morning person, of course I loved this! Most days I am the first in the office. I love getting my to-do lists together early each morning and executing on the list throughout the day. I have found this to be an extraordinarily important practice in building and managing a successful law firm.
I have never understood evening people. It seems that they miss out on too much and are always in reactive mode rather than proactive mode. That creates a stressful life. Of course that is not always true - I know many who are actually much more organized than me and run great businesses.
The study did find some positive traits of "evening people". They tend to be more creative and intelligent than morning people. I fully agree with those points! The study also found that they tend to be more extroverted. That is probably true, but I have not noticed that point to the same degree. At any rate, those are traits that are necessary in any balanced business team.
Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
This one is a fun little piece of pseudo-software litigation. The basic facts are that Facebook and its majority stockholder Mark Zuckerberg have been sued by Paul D. Ceglia, who claims 84% ownership in the website juggernaut. The part of this story that has been clogging the Net is that a state court judge in New York actually issued a temporary restraining order ("TRO") prohibiting Zuckerberg and Facebook, Inc. from disposing or selling any of its assets. This has produced the viral "Facebook assets frozen". Interestingly, Ceglia has produced a written contract, making this suit slightly more interesting than prior software litigation involving Facebook ownership in which former students at Harvard claimed Zuckerberg stole the idea from them (which a court ultimately found to be "dorm room chit-chat").
One aspect that the technology legal counsel in me finds interesting is that the Court granted the TRO. Generally speaking a TRO is an injunctive mechanism that can be used to stop someone from doing something. In order to get a TRO, you generally have to show that you have a basis for your claim and that you have a likelihood of success on the merits. I don't know for sure that New York is the same standard as Indiana, but I suspect that it is. That means that a court looked at the documents and found that there might be something here. I find that very intriguing. I will note, however, that Facebook's attorneys filed a motion to dissolve the TRO and noted that it was ex parte, meaning that it was entered without Zuckerberg or Facebook being given the opportunity to respond. It also sets forth that the only evidence presented to support the TRO was a "scant" affidavit. But, one must conclude that the Court nevertheless did the appropriate analysis.
Also, having read the documents filed, there might be something to discuss. However, the biggest issue that I see at the outset is that the contract allegedly happened in April, 2003. It would seem to me that there are is a statute of limitations issue, which may kill this lawsuit before it gets into really fun electronic discovery.
Facebook has removed this case to Federal court, which I think is a smart move. We'll see what develops. But I would urge everyone to consider the reality that this case poses to the software developer or web-designer. From the "Zuckerberg" side, be extremely careful what terms you put in your contracts because you may have to rely on or defend them later (after you are a famous success). In this software litigation, Cegila is claiming 84% ownership in the company based on a damages provision that stated that he would get 1% ownership for each month after January 1, 2004 that the contract was fulfilled. And, if the case survives the statute of limitations issue, this may become hotly contested.
Thus, be careful that you hold tightly to your equity in your company. Don't give it away willy-nilly. And, above all else, get good technology legal counsel; specifically ones that understand what should be in a well-drafted contract and that have available the expertise to determine how that contract language will play out in court.
Every attempt to make war easy and safe will result in humiliation and disaster.
--William Tecumseh Sherman
Though he said these words nearly a century and a half ago, General Sherman’s comments apply equally well to litigation, including the world of business law, technology law, SaaS law, and probate law.Litigation is a serious business, not something to be undertaken lightly.And it is often expensive – regardless of who has so-called “right” on their side because, just as in warfare, both sides often express to being on the “right” side.
Just like warfare, there is an element of risk and chance in litigation.Further, litigation can entail subterfuge and trying to pscyh out the opposing party.Sometimes you can achieve victory by making your opponent think that Point A is your objective so that when he or she marshals all of their forces in defense around that position, you pop up over at Point B.General Sherman employed this same tactic in his march to the sea, and it can be just as effective in litigation.
You might wonder why litigation seems to be much ado about nothing at times, why a large amount of energy, time and money is spent sweating over details.The reason is that the minutiae should not be underestimated.Those of us who are litigators in business law, technology law, SaaS law, and probate law don’t engage in these skirmishes simply because we want to or love to (though admittedly this might be true for some); we do it because in order to fully represent you our clients we HAVE to do so.We know that the little details can make or break a case, and we know that those fights over the placement of a comma or definition of a word, though long and tedious, can help stave off those future battles or wars – or at least give you the advantage of the high ground from which to pounce on your opponent later on.
Just like warfare, fairness has nothing to do with it.If you want to be involved in a lawsuit, you have to be willing to go the distance, and no matter how tiring you have to keep your eye on your objective.It’s a marathon, not a sprint, and you have to be ready for the long haul.If litigation were easy, you wouldn’t be in a lawsuit in the first place; you could sort out your differences over a couple of beers.But sadly that’s often not the case.It takes money, time, and even frustration to flesh out a resolution.Someone, and probably both sides, will probably bleed before it is over.
At Alerding Castor Hewitt LLP, we are ready and willing to go that distance with you, but the process works best if you are prepared to make that journey and are prepared for the cost and risk.If you stumble during a battle, get back up and remember that it’s warfare and that we will be there for you in those trenches.
This is one of those great posts that gets to combine cloud computing law with privacy law with political intrigue. Before I get too far in, I want to set out my own caveat. In my opinion, there is a data war brewing between the United States, EU, and China and everyone if vying for the top dog spot. The basis of this is the fact that each faction views the protection of data very differently and they each want to be the best. To just give you a surface level scratch of the differences I'll simplify (which is one of the things I do best): US is pro-capitalism / free market and free flow of information, even private data; EU is much more pro-individual and retention of private data, even at the detriment of businesses; China is much more pro-state and focuses on keeping data managed. Each entity thinks that they are completely right and they are trying to work together (except for China, who doesn't seem to care what anyone else thinks), but really they each have an ultimate goal of obtaining dominance of their position. Interestingly, I believe that the EU is seeking its dominance by applying economic pressures (something we've used for generations), and is having the most luck. Business are being forced to comply and are doing so in order to maintain market share. It is, nevertheless, very much a "cold war" between US and EU on the data protection front. And, as was anticipated, it is now entering into the realm of cloud computing law.
Before I delve into the ruling, I need to explain some concepts that I haven't put out here before. First, is that each member country of the EU has their own Data Protection Administration (DPA) that governs and rules over the access and permission to access private, individual data. In 1998, EU issued the European Directive on Data Protection that, among other things, prohibits the transfer of personal data to non-EU countries unless they haven't met the EU "adequacy" standards to protect the data. This directive actually causes great consternation in business as well as the litigation arena, privacy litigation or otherwise, because it limits what a U.S. defendant can legitimately produce. In a country where discovery in a lawsuit is often viewed as a fishing expedition in which one drains the lake and simply picks the fish up off the bottom, this limitation on access to data has caused and is causing businesses sleepless nights and making lawyers rich. Enter the U.S. Safe Harbor framework. This is essentially a compliance mechanism devised (supposedly) through joint efforts between the U.S. and EU that businesses can opt into by self-certifying that they comply. The main areas of focus are transfer of data, notice to the data holder, transfer to third-parties, access to data, security measures, and data integrity. If a business properly complies with this self-certification they will be deemed "adequate".
I know you've read all of this and said "What does any of this have to do with cloud computing law, you dolt!". To which I would reply, "ouch" and then go on to explain that yesterday, Germany's DPA made a ruling on the use of cloud computing and the implications to the European Directive. Most importantly, the DPA determined that clouds located outside the EU are per se unlawful, even if the EU has issued an adequacy decision in favor of the foreign country. Thus, if your cloud is based anywhere other than the EU, it is unlawful to store private EU data there (and in case your curious, everything is private data in the EU's eyes). Of course, the decision goes on to state that you can avoid this result if you apply German rules on data processing and using the EU-approved model contract for controller-processor data transfers. Basically, if you want to follow our rules and use our contract, you can do it.
What is even more interesting is that the DPA determined that the U.S. Safe Harbor is not adequate to protect information in the cloud. Thus, these companies that go through the self-certification process, still can't host cloud data (sorry Google). The reasoning is that even though one entity may have self-certified, the inherent nature of the cloud is that data is accessible to third-parties and those parties are not adequate.
This leaves the ultimate question of "what does this mean for cloud computing" The obvious answer is that it will force companies that want to utilize the cloud to either (a) adopt the EU rules and contracts or (b) enter a binding corporate rule that complies with the EU rules (which is another option the German DPA suggested). This will, ultimately, increase the costs associated with using the cloud and will likely have a cooling effect on pushes on that front. OF course, the developments that I will be watching from the cheap seats as an technology lawyer is what response the U.S. takes. Will it rely on businesses to police themselves and comply as they choose or will it try to enforce rules to keep the Safe Harbor alive. And, if Germany makes this type of ruling on the cloud now, essentially obliterating the Safe Harbor Framework, can Safe Harbor survive? Or more importantly, should Safe Harbor survive?
Your friendly Indianapolis attorney at Alerding Castor Hewitt LLP here with a quick follow up on my first blog regarding collections for our business law, technology law, and SaaS law clients.A link to that post is listed below for those interested.
One of our Saas law clients recently obtained a favorable resolution in one of their cases to collect on a contract from an out-of-state debtor.We had obtained a default judgment for the client and were pressing forward with the proceeding supplemental here in Indiana.I don’t know if the debtor was ignoring the process, moving around the country, or what was going on, but he wasn’t responding.However, he finally contacted us when he ran into trouble trying to enter into a lease; apparently the judgment popped up on his credit history when the landlord ran a credit check.To make a long story short, the debtor was more than willing to come forward to settle the claim with our Saas law client.
This success story just bears out the point of my original post:it’s worth taking some minimal time and expense to proceed with a proceeding supplemental in Indiana on out-of-state folks before undertaking some more involved process.The result can be surprising.
Your friendly neighborhood technology counsel here: A couple of recent state court decisions are going to start personal injury attorneys frothing at the mouth, and might render some sleepless nights for defense attorneys. Both Ohio and Florida recently issued opinions in which they applied their state's respective long-arm statutes to garner personal jurisdiction over an out-of-state resident for tortious conduct that transpired over the Internet.
First, you need to know what a long-arm statute is. Essentially, it is a mechanism by which a state can obtain jurisdiction over an out-of-state resident for activities or actions undertaken that are related to an in-state resident or citizen. Without boring you with the legal details, they stem from the concepts of full faith and credit and due process and require a minimum amount of contact within the state to trigger. And, they have posed a pickle in Internet litigation because the Web allows access from out-of-state residents without actual presence or contact. At least that was the case until recently.
In Internet Solutions Corporation v. Marshall, the Florida Supreme Court, addressing a certified question from the Eleventh Circuit, determined that exercising jurisdiction over an out-of-state resident under Florida's long-arm statute did not violate due process. The basic facts are that Marshall ran a website based out of Washington, where she is a resident. She had no contact with Florida other than a short business related trip several years ago. However, she wrote a blog about a Florida based company and then she and some other posters trashed them online in the comment section. The Florida-based company sued for defamation in federal court under a diversity action (action between two citizens of different states). The district court found no personal jurisdiction and the Eleventh Circuit certified the question to the Florida Supreme Court. The Florida Supreme Court looked at two main analysis points: (1) whether the complaint alleged sufficient jurisdictional facts to being the action within the ambit of the statute, and (2) whether sufficient minimum contacts are demonstrated to satisfy due process requirements. The Court determined that both were satisfied. An interesting analysis point is that the Court reasoned that the long-arm statute had been applied to telephonic, electronic or written communications in the past and that the Internet is an extension of those rulings. Overall, it is a well-reasoned opinion applying a standard long-arm statute to the Internet.
Similarly, in Kauffman Racing Equipment, LLC v. Roberts, the Ohio Court of Appeals reached a similar conclusion when determining if an out-of-state residents comments over an Internet blog about an in-state plaintiff can be grounds for jurisdiction over the out-of-state resident in a defamation action. The Court utilized the same general analysis as in Marshall.
The obvious implications to Internet litigation of these opinions are pretty substantial. Until now, suing for tortious actions done over the Internet has been difficult because of those pesky due process minimum contacts, but that is slowly changing. These cases are a framework for an enterprising personal injury lawyer to sue someone that has never set foot in their state for tortious activities on the Web. And, right now we are only talking about defamation, but why wouldn't it extend to other torts. What about tortious interference with a business relationship, intentional infliction of emotion distress, and assault, to name a few. This is going to change the face of Internet litigation. We are going to see more lawsuits based on this. And, further, you, as a business owner, will need to be aware of what you are putting out on the cyberspace. You may be inadvertently exposing yourself.
And think of the other areas of technology litigation that this can be tied into. Two of the most predominant to me are privacy litigation and cloud computing law. Imagine that I have posted private information about you on the Internet in contravention to the law. We've never met and I've never been in your state, but the Internet has. Under these holdings, I can be hauled into the courtroom to address my actions. Or I've placed something into the cloud that doesn't belong. I've now exposed myself to multiple jurisdictions depending on to whom I have shown the material.
The ramifications are mind-numbing, but we'll see what other states start jumping on board. As I've always said, technology litigation and Internet litigation is in its infancy and we are going to see wide-spread changes from court's making decisions at the federal and state court level. It should be fun.
Be prepared: I'm going to get on a bit of a soapbox. I read a recent article at WSJ.com entitled "Using Social Networking as Legal Tool" (Linked Below). There is nothing wrong with this article. It very succinctly and pleasantly explains how certain law firms are using social networking and the Web to find clients for high-value plaintiff cases. And I don't disagree with that approach. As an attorney posting on a blog, I too hope to use social networking to get business, and would be foolish to argue otherwise. Thus, I cannot fault the firms employing such tactics. And I am glad that a more "mainstream" press outlet would pick up a story of this nature; highlighting the use of technology by lawyers.
The fault that I find, and what, frankly, irks me, is that this article gives no credence to the more innovative aspects of technological use that are gaining hold in the legal community. The article highlights the practice of "ambulance chasing" for the 21st Century. But there is so much more happening in the cyberworld. Legal scholars like Eric Goldman are posting daily with the new and interesting ways that technology litigation and cyberlaw are being explored. Courts are posting their opinions on-line to further the pursuit of knowledge by the populace. Courts and communities are moving to on-line activity such as filing and case work to speed up the legal process and reduce our environmental impact. Technology legal counsel throughout the world are espousing the virtues and pitfalls of cyberlaw. Property rights are being generated in virtual worlds. Privacy litigation is defining what can and cannot be exposed in the real and virtual worlds. Software litigation is defining what can and cannot be done with these wonderful bits and bytes of information. Cloud computing law is going to dominate the future courtrooms of the world as more and more data is put into the cloud. All of these things are happening now.
Our world is becoming a smaller place as we all become more connected, and lawyers are at the forefront of those debates and discussions. Yes, I think it is very interesting that Law Firm X has 25 people on staff twittering and establishing domain names so that sufferers of acute hypersensitivity can find a law firm willing to represent them. PLEASE don't misunderstand me because I believe that allowing those people to easily find representation IS IMPORTANT. But it is not the only thing that is happening out there in the cyber-ether. Instead of focusing on the new and novel way that lawyers are getting business, let's shine light on how those in the legal community are using the Web to define, explain and expand our world.
I'm going to cheat a little on this. I read a great blog post by Jeff Ready over at the McStartup blog (www.mcstartup.com). The blog post is all about the importance of radical innovation. I have a place in my heart for radical innovation because I believe that in the legal community, we are the radical innovators. ACH strives after its goal to be an information technology law firm, a venture capital law firm and a business law firm, but we go about it in a way that is radical to many other attorneys, because we are business-minded first and we are looking at the areas of business that others are overlooking. So, rather than re-capsulate Jeff's thoughts, here they are in full quoted glory: The Art of Radical Innovation
Following up on my post about Tom Mason and Rose-Hulman, I wanted to touch on something that Tom is a big believer in and used as the focus of his retirement speech: radical innovation.Radically innovation refers to that type of innovation so powerful and different that it can completely change the profession, institution, industry, business, or person in one fell swoop. Thinking about how radical innovations come about and how they impact the world around us is a favorite subject of Tom.
I bring it up here, because I believe that radical innovation is the key to success in whatever you do – and not just radical innovation, but, as Tom puts it, “continuous radical innovation” – the constant search for those things that will turn your world on its head.
It is true that most businesses are looking to innovate, but to think about radical innovation really changes the way you view things. It’s very different from thinking about “constant innovation” or “continuous improvement” which is the mantra of many businesses today. As Tom quipped during his speech, “General Motors followed the mantra of continuous improvement all the way into bankruptcy.”
Put another way, and to borrow from the world of academia, continuous improvement gets college campuses wired, installs the latest lab environments in the buildings, and creates a campus environment more rewarding for the students. Radical innovation moves the entire university experience online and does away with the campus altogether. Continuous improvement puts shocks on your carriage. Radical innovation replaces the horse with an engine. Continuous improvement accelerates the reload speed and accuracy of your rifle. Radical innovation gives you a machine gun. You get the idea.
The challenge is to continuously seek the radical innovations in your business – to look for and to go after the very technologies that, if developed elsewhere, would bring a swift and painful end to your business. In the mean time, of course you need to look for ways to improve your business, your products, and your practices. However, time and resources need to be spent going after the radical, not just the better.
This probably sounds a lot easier than it is. Radically innovation is an unpredictable, expensive, and messy business. With limited resources, the temptation will always be to direct those resources toward the projects that will have the most immediate and predictable impact. Just as you would imagine the mad scientist to find himself surrounded by doubters (right up until the invention actually works), you’ll find that investors, employees, partners, and competitors will view resources directed to these “rogue projects” as wasteful, silly, and distracting.
Thus is the challenge of going after radical innovation within an ongoing enterprise. The near term benefit sits squarely on the opposite, and in a world of business that’s often driven by quarterly numbers, high rates of employee turnover and movement, and a desire for immediate satisfaction, it can be extremely difficult to manage the balance of resources between what is today’s reality, and what might change that reality.
The pressure will be on improving today’s reality. But if you’re not careful, you’ll have the world’s greatest carriage company – right up until Henry Ford hands you your lunch – just ask GM.
Every once in awhile, I have the inkling to make a blog post that is not about developments in privacy litigation or technology litigation or cloud computing law or foreclosures or any of the other endless stream of ideas and legal thoughts that pass across my desk. This is one of those times. Because, while I think it is important for our readers to know that Mexico passed a new data privacy law or that litigation related to CAN SPAM is likely a rising field, I think it is equally important for our readers and clients to gain insight into the psyche of Alerding Castor Hewitt, LLP as it is viewed through the eyes of this humble writer. Thus the question: Who are Alerding Castor Hewitt, LLP.
First, I must note that I intentionally chose the plural tense in that question because, although I agree that Alerding Castor Hewitt, LLP is an entity that could be viewed as a singular, I fully believe that we are made of the people that permeate this place. Thus, we are a plural. Second, if what you are looking for is our resumes and the curriculum vitae of these Indiana technology counsel, you can check them out on our webpage.
Rather, I intend to discuss who we are in such a way that our readers and clients can relate to the ideals for which we stand. We are the rogues. We are the fighters. We are the fixers. We are the counselors. To a person, the attorneys at ACH are products of years of experience. We have all trudged through the mud of the legal profession in other locales before coming to this place. Which, inevitably, leads to the question of "why here?"
The answer to that simple question is that because here we can be what our clients need. We can be entrepreneurs. We can be fighters. We can truly embody the idea of counselor that so many of us sought when we went to law school in the first place.
Does that mean that I always give my clients the advise that they want to hear? No. My job, and the job of any great attorney, is to give the advise that is warranted in the situation. ACH not only gives its attorneys the ability to do that, but rather encourages it. I can honestly say that I have practiced from the biggest of big to the smallest of small, in the private sector and the public sector, and there is no place that I would rather practice law. I have told colleagues that ask me about ACH that I practice law in a way that every attorney wants to practice when they are honest with themselves as to what they want out of their profession.
This place is filled to the brim with spirit, humor, knowledge, and skill. And I think there are two quotes that best answer the question of Who are Alerding Castor Hewitt, LLP. The first is from Ulysses S. Grant. In a speech in London, Grant stated "Although a soldier by profession, I have never felt any sort of fondness for war, and I have never advocated it, except as a means of peace." The second is from Ode by Arthur William Edgar O'Shaughnessy, but was made famous (in my opinion) by Gene Wilder in Willy Wonka and the Chocolate Factory: "We are the music makers, And we are the dreamers of dreams."
Your Indianapolis Attorney at Alerding Castor Hewitt here with another litigation post for the business and technology world, this time regarding preliminary injunctions.What is a preliminary injunction?In simple terms, it is an equitable remedy that you can seek asking a court to order someone else to stop doing something or cease threatening to do something that is causing or is likely to cause you irreparable harm.It is another weapon in the litigation arsenal, one to restore the status quo between you and another entity until a court can resolve your dispute.
A request for a preliminary injunction can arise in any number of situations.I won’t try to name all of those that I have encountered, but one example involves claims of infringement of intellectual property (trademark, copyright or patent).Another example is interference with a contract.And of course, a recent example is the decision by the U.S. District Court for the Southern District of Indiana in Workman v. Greenwood Community School Corp., cause no. 1:10-cv-0293-SEB-TAB (S.D. Ind. Apr. 30, 2010), enjoining a school from permitting a school-endorsed prayer at a high school graduation.
The difficulty in obtaining a preliminary injunction should not be underestimated.This is in part due to the hefty applicable standard for this remedy, which includes a showing of a reasonable likelihood of success on the merits.And sometimes just finding time on a court’s calendar on short notice to hear your arguments can be a challenge.But if you can convince a court to issue a preliminary injunction, it is not unusual for a settlement to follow on the heels of the court’s order, in part due to the fact that the court will have concluded at that point that you will likely succeed on the merits of your claim.
Another possible result, though rare, is a decision by the court to consolidate a preliminary injunction hearing with a trial on the merits.This happened recently on a case handled by Brian Hewitt and Angela Hopper (a contract attorney who has provided assistance on a number of occasions).Brian and Angela were seeking to obtain a preliminary injunction in a probate litigation matter involving the appointment of a guardian to oversee the health care of an elderly lady.Their clients’ claim boiled down to a request that a settlement agreement be enforced.Not only were they successful, but the court took the interesting step of consolidating the hearing on their motion with a trial on the merits and entered judgment outright on their clients’ claims.
Brian and Angela’s case reveals an exciting aspect of litigation:sometimes the outcome of a hearing can be a surprise (and better than anticipated).In any event, deciding whether to seek a preliminary injunction is no light undertaking.As with any litigation matter, you should consult with your counsel to weigh the pros and cons before making a decision on whether a request for a preliminary injunction will advance your interests.
Your friendly neighborhood technology counsel here: So, Mexico recently passed a new data protection law. On April 27, 2010, Mexico passed the Federal Law for the Protection of Personal data, which is likely to be signed into law by the President in the near future. This law not only allows for a mind-boggling $1.5 million penalty for violation, but it also applies to the private sector. Private and public entities will need to protect themselves from privacy litigation.
This law is much akin to the EU's data privacy laws. Meaning, among other things, that scope of the law is extremely broad. Additionally, all data is included, but certain types of data are given greater protection. This Sensitive Personal Data includes: "In particular, consider those that may reveal sensitive issues such as racial or ethnic origin, health status, present and future, genetic information, religious, philosophical and moral, union membership, political views, sexual preference." (translated from the Bill). The dissemination of any information that contains this sensitive data will require written consent from the owner of the data, the individual.
Now the $1.5 million question: What does this mean for my business? The simple answer is: Potentially alot. In the world of e-discovery and privacy litigation,this issue has already begun to rear its head in the context of the EU's data privacy law. With the number of American manufacturers and companies with a presence and facilities in Mexico, this type of broad legislation could result in the expenditure of millions of compliance dollars to craft protocols and document retention issues. Think of the billions of e-mails that must run through a Fortune 500 company. Now think about how many of those e-mails contain some amount of information that fits within the category I described above. To disseminate that information, each individual has to be contacted and give written consent. Like I said, mind-boggling.
Obviously, society is walking a thin line between protection of information and the availability of information for legitimate purposes. Privacy litigation both here and abroad is going to shape the breadth and direction of that line. And then, when we think we have a handle on it all, we'll start talking about what we are going to do under cloud computing law for that data that is stuck firmly in the cloud.
I am an Indianapolis Attorney here at Alerding Castor Hewitt LLP.This is my first blog post – so bear with me.As a brief introduction, my role at ACH is working on our litigation team, both at trial and on appeal if necessary, on issues related to business law, probate litigation, SaaS litigation, and other technology litigation – just to name a few of the areas.
One area often overlooked in the litigation process is the area of collections.Some lawyers might look upon the collection process with disdain because it’s not as “sexy” as doing other things.But at bottom, bringing a suit is all about collecting money.After all, a judgment is just a piece of paper.At ACH, we pride ourselves on being able to assist clients in the collection process; it’s a part of our commitment to being a Partner in Success and we represent a variety of clients in business litigation and technology litigation in this process.
We often encounter situations where we have an out-of-state defendant who has breached a contract by failing to pay for services.In fact, it’s not that unusual in cases for our SaaS law and technology law clients for this to occur.Many times such a defendant will fail to appear to defend itself in the suit and we wind up obtaining a default judgment for our clients.The question is, what do you do next?Do you undertake a proceeding supplemental in Indiana to try to collect on a judgment when the defendant is unlikely to show, or do you take your default judgment (i.e., piece of paper) to the defendant’s state and try to domesticate it (in other words, try to collect there)?
I recently witnessed a couple of examples of this very situation.The answer boils down to a matter of cost-benefit analysis.In my humble opinion, it’s probably worth the minimal time and effort to undertake a proceeding supplemental in Indiana.Plus, you don’t have to immediately take on the added expense of hiring another lawyer in the defendant’s state to do the job for you.
The reason for this is that you never know what will motivate someone to make good on a debt owed to you, or at least negotiate some sort of payment arrangement.While it doesn’t happen in every case, it’s not unusual for a defendant to try to resolve a case after receiving notice of a proceeding supplemental.This is even more likely once they receive notice of one of the later steps in that process, such as an order to show cause why the defendant should not be held in contempt for failing to appear or a body attachment warrant to arrest the defendant.And if it doesn’t work out, you’ll still have your judgment that you can take to the other state.
Your friendly neighborhood technology counsel here: As you likely know, my goal is to become THE Indiana technology lawyer; however, technology is not my only area of interest. Like many of the folks at Alerding Castor Hewitt, technology law is a passion, but we all strive to be a full service law firm for all businesses. Thus, in addition to tech stuff, I also litigate matters for several banking and business clients. And, as any good lawyer does, when I see changes in the law that may impact my clients, I want to shout it from the rooftops. One such change that, to date, has gone largely unheralded is an amendment passed to the Indiana "Get Hope. Get Help" statute (Ind. Code 32-30-10.5-8).
For those that don't know, this provision, enacted originally in 2009, requires a lender to send a written notice to a mortgage holder regarding their default and options to avoid foreclosure before the lender can proceed with a foreclosure suit. The intended purpose of the law is to avoid unnecessary foreclosure of residential properties by "requiring early contact and communications among creditors, agents and debtors" and "facilitating the modification of residential mortgages in appropriate circumstances." This is debtor safeguard that lenders have to navigate before they can foreclose on a property. The letter itself has a large "GET HOPE. GET HELP" header, hence the nomenclature.
The new provisions amended to the statute in the 2010 session clarify that any time before a sheriff's sale, a debtor can do one of three things with the property. They can: (1) appeal a finding of abandonment; (2) redeem the real estates; or (3) retain possession of the property until the sale. These three things already existed in Indiana law, but are now more clearly set out and obvious. The goal is clearly to make the options abundantly clear to all involved.
To me the more important change is the requirement that the applicable notice prescribed by the statute must be in 14 point font. The necessary language is "Mortgage foreclosure is a complex process. People may approach you about "saving" your home. You should be careful about any such promises. There are government agencies and non-profit organizations you may contact for helpful information about the foreclosure process. For the name and telephone number of an organization near you, please call the Indiana Foreclosure Prevention Network".
So, all you lenders out there heed the warning of the new statute. There are procedures that you must follow before you can even get to a court room. While I understand the reasoning behind these provisions, they are certainly something about which lenders should be aware. The foreclosure process is a necessarily lengthy one, and you don't want to unnecessarily extend that by using the wrong size font.
I recently read a summary of a lecture on applying the seven deadly sins to software development. The sins are:
Lust
Obsessive or excessive thoughts
Gluttony
Over-indulgence, over-consumption
Greed
A sin of excess like lust and gluttony, but in reference to wealth
Sloth
Laziness, indifference, apathy
Wrath
Uncontrolled feelings of hatred and anger
Envy
Resenting another because they possess something you do not
Pride
Excessive love of self
The idea is not to sell products leading to the sins themselves but to creatively apply the concepts of one or more to your software product to create an appeal and addictiveness factor to your product. I wonder if the same can be applied when customizing a product / service for a new business or market opportunity.
Lust
Do you touch a deep seeded relational need in people?
Gluttony
Do you tie into a desire for comfort or consumption?
Greed
Do you solve financial or monetary needs of your customers?
Sloth
Do you create efficiency or freedom of time for your customers?
Wrath
Do you provide a forum for dialog, debate or conflict resolution?
Envy
Do you provide customers a higher standard of living?
Pride
Does your product/service provide customers a sense of identity?
Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
I must take a moment to open with a caveat. The study of privacy and hence privacy law or privacy litigation is an analysis that spans centuries. In fact, while it seems like privacy issues have only recently come to the forefront with the advent of technology, they have, in fact, been prevalent in ever major level of recorded history. I put this point out there to help you recognize that there are books and books addressing the issues of privacy and my little foray into the issue is but a nail-scratch on the surface of a very large issue. Nevertheless, I would be remiss in my role as an Indiana technology lawyer if I didn't delve into the issue at least from an overview perspective. Now, onto the bigger (and better) question of "what the heck is it?". There are, in my humble opinion, four basic approaches to this question: (1) academically; (2) legally; (3) structurally; and (4) realistically. I will address each approach separately.
Academic Perspective: In the simplest of academic terms, privacy law is the method and mechanism of protecting the private matters or interests of the citizen. This definition leads to the ultimate issue from the scholarly perspective of what is privacy. The debate over that simple term, however, has raged for years and encompasses an extremely wide umbrella of ideas. From a political perspective, privacy is that sphere of information that wholly belongs to the individual and is unnecessary for the overall governmental function. Aristotle believed that there were two spheres. The first is the public sphere and in this sphere is the information necessary to govern the polis or city-state. The other sphere is the individual sphere in which each person has the information and matters pertinent to only themselves. It does not impact the polis and is solely private, but must exist to ensure the welfare of the entirety. Later, John Lock would address the issue by theorizing that the inherent state of man (the state of nature) is one in which they all have equal right to their self. It is this act of giving up some of these rights to the greater body that leads, according to Locke, to the development of organized government.
Anthropologically, privacy are those matters that we keep from the community at large. Anthropologists have found that even in social settings where there is very little physical privacy, the members of that society will act to protect their own privacy in other matters (i.e. hiding feelings, averting eyes, etc) to maintain some level of intimacy and ultimately, individuality. And this doesn't even get into philosophically, economically, medically, or any other - ly of which we may think. As you can see, the academic perspective is somewhat scattered, but the overarching theme is that privacy (and subsequently privacy law) is the component of self that is maintained to establish and maintain the individual.
Legal Perspective: From the legal perspective, privacy law is the protection of information related to the person. There are two basic types of legal perspective. The first is the protection of private information from a constitutional perspective. This is the basic premise behind the Fourth Amendment. The idea that citizens are free from the government simply prying into their business is fundamental to American jurisprudence. It is also a fundamental difference between the United States and other countries that has led to some very interesting debates related to privacy, but we'll cover that more in Part 2. From a constitutional standpoint, privacy is the protection of the individual from the invasion of the government without a reason. The other legal perspective is the protection of information from the tort perspective. These are the private causes of actions that relate to the invasion of privacy and lead to the majority of the privacy litigation that we see today. Questions such as: can my employer look at my e-mails; can my insurance company see my health records; can this website give my address to the cyberworld. These questions are the bread and butter of the tort perspective. And, frankly, are the most important to my clients. But overall, the legal perspective of privacy is, like the academic perspective, focused on the establishment and maintenance of barriers between individuals.
Structural Perspective: What I'm calling the structural perspective is actually the most amorphous perspective that I've made up. It is deals with the components and subparts that make up privacy law because the parts make up the whole. But, the components of privacy law are as widely varied as the other definitions. There is a component for protecting information about one's health. There is a component for protecting those activities that one engages in in their home. There is a component for protecting the contents of one's vehicle or property. There is a component for protecting one's personal contact information. There is a component for protecting one's financial information. The list goes on. Needless to say, from a structural perspective, privacy law is the protection of that information that is necessary and pertinent to our identity, well-being, and overarching individuality.
Realistic Perspective: Finally, we get to the perspective that is most likely to impact our individual lives. For the individual, privacy law realistically means those steps and actions that one must take or protect to ensure that information pertinent to your well-being is protected from dissemination to parties without legitimate interest in the information. Whether this is monitoring against identity theft or moving to quash a subpoena that seeks information in violation of HIPAA. These are the steps that have to be done to protect your individual information. For the business, privacy law realistically means the steps and actions that must be undertaken to protect against the dissemination of information related to either my clients, my products, or my business perspectives. This is important both from a regulatory approach and a litigation approach. Both individuals and businesses need to know (a) what information is protected and (b) how to protect it. These are the fundamental realistic questions to be answered.
So, in conclusion, privacy law is an enigma wrapped in a riddle. We know we need it, but aren't always a hundred percent sure what it is. It is rooted in our mythos and theory. It is part of the underpinnings of society, both American and human in general. And, the more connected we get, the more important it becomes. In Part 3, I'll take a look at some of the major legal precedents on the issues of privacy law and litigation. Stay tuned.
This is the third post in a series on developing a good business model for an early stage company.
2. Solid Management Team
I have heard it said that more businesses fail due to cash flow than anything else. I completely disagree. I say that more businesses fail due to management team issues than any other reason. If a company dies because of cash flow, it is usually because the wrong person was at the helm and poorly planning and/or making bad decisions – either market opportunity was not adequately addresses or expenses were not properly managed.
Likewise, unmanageable disagreements and in-fighting amongst a leadership team kill a ton of companies. Developing a solid business model MUST include an organization of the right players on the management team of the business.
Here are some points to consider when structuring a management team (list will continue in next post in series):
a. Only take on partners that you NEED. In April 2007 I realized that I could not further scale my business law practice without taking on a business litigator as a partner. I actually enjoy litigation, but I could no longer balance the work load from business law, funding law and technology legal consulting matters with the schedule of a litigator (“Sorry client, I cannot get to your licensing agreemnt today because I am in depositions all day” = doesn't fly). So, I went out and found the best business litigator I knew – Michael Alerding – and we launched the first version of Alerding Castor Hewitt, LLP. Point is – I NEEDED to partner with Mike in order to further scale the business and create further profit.
b. The key leader (usually a President or CEO) must understand financial models. I cannot stress this one enough. A key leader who does not understand cash flow analysis or good financial practices will sink a company every time. If additional training is needed – great. If the leader must surround himself with others who better understand finances – great - surround the leader with these folks (but make sure the leader is willing to heed advice (a point which will be addressed in the next post).
You might wonder why an Indiana law firm with a practice in several areas of technology (Indiana Internet Litigation, SaaS Legal Consulting to name just two) finds itself supporting a golf outing that raises money for adoption? "As a firm that prides itself on supporting the local community, we don't always align our charitable giving strictly to serve our immediate demographic. There are many organizations deserving of our support and Adoptions of Indiana is certainly one of them," comments Dave Castor, Founding Partner and lead counsel in the firm's involvement with Internet-based companies.
On Tuesday, August 31st Adoptions of Indiana will host it's third annual golf classic at the Golf Course of Indiana. Now in its third year, this event looks to build upon past successes and top past earnings to ensure that critical programming continues for birth parents and adoptive families alike.
Adoptions of Indiana was founded in 1995 by professionals in the fields of mental health and social work whose lives were personally touched by adoption. ADOPTIONS OF INDIANA is a not-for-profit 501(c)(3) corporation that is licensed by the State of Indiana as a child-placing agency.
The agency is a member of the Joint Council on International Children's Services, the North American Council on Adoptable Children, and Indiana’s Adoption Coalition. In addition to being licensed in the state of Indiana, they are also licensed and approved by the state of Connecticut to assist their families who are adopting children born in Indiana.
Adoptions of Indiana works with highly respected and well established adoption agencies and adoption attorneys throughout the United States. Our agency provides domestic and international adoption services to Indiana residents.
Your friendly neighborhood technology lawyer here: Clients and colleagues often ask me to explain what I mean when I say "technology litigation". And, to be frank, that term is really composed of several different subsets of the law. One such subset is privacy law. Over the next several blog posts, I will provide a general overview of privacy law and privacy litigation to arm you, my humble reader, with the knowledge to assist your company (as well impress your friends at parties).
The Parts:
My analysis will address the following questions:
What is Privacy Law: This part will focus on the academic, legislative and practical definitions of privacy law, as well as its general subparts / components
What is the current state of the law: In this subsection, I will focus on the various statutory schemes and case law that has developed related to the privacy law. I will also highlight the current black-letter legal principles at play in privacy litigation.
What does it mean for your business: The third substantive subsection will focus on the implications of privacy law to the general business. It will focus on: (1) regulatory compliance; (2) protection and use of your own data; (3) protection and use of your client's data; and (4) the implications of privacy laws on litigation a business may face.
What will the future hold: In the final subsection, I will focus on the future of privacy law. In particular, I will look at the current and future issues revolving around the different approaches to privacy take by the United States and the European Union. I will also look at the implications on privacy law of advanced technology and the increased use of social media.
Why it matters:
Perhaps, however, the most important question to be address is: why does privacy law matter to me? The succinct answer is that any business or business owner seeking to profit in the 21st Century must have, at the very least, an elementary level grasp of privacy law because governments throughout the world will demand compliance with an expanding set of legislative and precedential authority. It is this level of education that I plan to provide over the next few blog posts.
Your friendly neighborhood technology counsel here: The Indiana Supreme Court recently discussed the ability of a lay witness to provide "expert" opinions in Sibbing v. Cave, 922 N.E.2d 594 (Ind. 2010). In that case, counsel asked the plaintiff what she believed caused her pain. She responded something to the effect of "the bulging disc in my lower back", and the opposing party objected based on a lack of expert foundation. The basic argument to the trial court was that this lay person cannot provide a medical diagnosis of what caused her pain because she wasn't an expert. The Supreme Court, upholding the trial court, found that a recitation of one's personal belief regarding a fact (in this case, the source of her pain) was within the scope of Indiana Evidence Rule 701.
I can read your minds at this point of my blog. You are thinking, "What in the heck does this have to do with technology litigation, SaaS litigation, software litigation, or any of the stuff that you normally discuss?" The important point of this case is that it can be used to get to "expert" type opinions from a lay person. This is important in tech lit because most of our technology clients have some knowledge as to the x's and o's of what is happening behind the scenes of a given situation or product, but they don't necessarily have enough expertise to survive a full-blown Daubert challenge to their status as an expert. Using Sibbing, a tech litigator (i.e. me) can now ask the straight forward question of "why do you think the widget broke" or "how do you think this SaaS agreement harms your company" or "what do you think your damages are" and allow our clients to spout their opinions, and in the face of a challenge, cite this precedential case. As you can imagine, the potential of this ruling is huge.
Additionally, for those really interested in law-dorking out [yes, I made up that word, so what], there is also a good analysis in Sibbing of the use of the medical diagnosis exception to the hearsay rule found in IRE 803(4) that distinguishes the previously held standard set forth in Coffey v. Coffey, 649 N.E.2d 1074. Not overly important in tech lit, but a good read for any litigator.
Be prepared: I'm going to get on a bit of a soapbox. I read a recent article at WSJ.com entitled "Using Social Networking as Legal Tool" (
Your friendly neighborhood technology counsel here: As you likely know, my goal is to become THE Indiana technology lawyer; however, technology is not my only area of interest. Like many of the folks at Alerding Castor Hewitt, technology law is a passion, but we all strive to be a full service law firm for all businesses. Thus, in addition to tech stuff, I also litigate matters for several banking and business clients. And, as any good lawyer does, when I see changes in the law that may impact my clients, I want to shout it from the rooftops. One such change that, to date, has gone largely unheralded is an amendment passed to the Indiana "Get Hope. Get Help" statute (Ind. Code 32-30-10.5-8). 
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