29 posts categorized "February 2012"

Angel Summit Next Week

Next week is the annual Angel Capital Association Summit, this year held in Austin, Texas.

I'll be speaking on a March 7 panel with Zach Brandon and Joe Bartlett, moderated by Dan Rosen. Our topic is "The New Reality - Impact of Washington DC Policymakers on Angels and Startups," and we mean to cover tax issues impacting (favorably?) angel investing, proposed changes to Reg D, and crowdfunding.

Angel in austin

Speaking of crowdfunding: looks like the Senate Banking Committee is having a hearing on the topic next week, too. Shoutout to @ryanfeit for his heads up on this. I'd feel better about it if there was a "markup" session scheduled (maybe there is and I'm not seeing it) and if we knew we were working from the McHenry bill which passed the House, or else the Brown bill. The Merkley bill and the NASAA proposal (at least in the form NASAA circulated to its members for comment) are non-starters.

Photo: "Taken in Austin Texas in 1997," by Eric Hunt/ Flickr.

Hey Ken Adams: I’m Barking Up This Other Tree Over Here!

It's ironic that Ken Adams should cast me in the role of defender of the quality of Big Law legal templates.

Ironic, because I have never worked at a big law firm.

Dog barking up wrong treeThe two law firms I've worked at are mid-sized - between 20 and 30 lawyers (the first may be bigger than that now).

Of course, in my chosen areas of practice, parties on the other side of my clients are often represented by big firms. In fact, they usually are.

During a stint in house at a fast-growing enhanced telecommunications service provider, I hired excellent lawyers who happened to work at big law firms.

So I know big firm lawyers and I know their form files. I’m even friends with some of them and I even help myself to some of their forms.

But here's the thing: I don't really care about the quality of the startup docs Big Law generates. Not in the first instance.

In the startup space, clients don't want to spend much on basic documents. They want to leverage what everyone else uses. And, most often, they want the confidence that what they are using is “standard.”

There is a large set of exceptions to everything I just said in the prior paragraph. But bear with me.

The point about getting Gunderson, and DLA Piper, and Cooley, and Wilson Sonsini, and everyone else, to publish their startup forms on Docracy, or another open forum, is not to thereby improve, qualitatively, the forms that startupers are using. The goal is much simpler and much less ambitious than that.

It’s to surface what it is that 90% of the industry is using, day to day.

Once that’s done, we can move to standardization – which is still not about quality (sorry, Ken).

With all the templates “outed” and circling like goldfish in the proverbial barrel, a clever person like Kingsley Martin, equipped with software, could take aim and declare, categorically, what the de facto standard provisions are, contract by contract, and even what the de facto variants are within each template.

Ultimately, you might have a single, industry standard template for each subject. If a critical mass of law firms abandoned their own templates in favor of the open-sourced standard, the benefits would be similar to those derived from having the NVCA model legal documents for preferred stock financings.

But I can be more concrete about the benefits of reducing each document to a single, industry standard. These benefits include:

  • Virtually zero cost to startupers for preparing basic forms that everyone (startupers, investors, acquirers) will have baseline confidence in.
  • Consistent frameworks for discussion (on blogs, at conferences, over kitchen tables) about what discrete provisions mean, and how they should be interpreted, resulting in a greater understanding of, and ownership over, what the documents mean.
  • Increasing the stakes for varying the templates. Because to vary from the accepted standard involves costs – time to draft, time to socialize internally, time to advocate to other parties – customization will happen only when appropriate (deliberately, not by happenstance).
  • Moving more of the focus of legal counseling, at the startup stage, to inculcating an understanding of what it is people are being asked to sign.

There are times to be original, and that’s when you sit down to write (or walk to dictate) your blog post, your screenplay, or a clever contract the legal community hasn’t seen before.

But the typical startup assignment of inventions, the typical startup charter, the typical developer agreement, those should be boilerplate, quality be damned. You can pay for “quality” when you’re otherwise already paying to customize your deal.

Photo: Jennifer/Flickr.

Simple, Self-Provisioned Website on Amazon S3

There are talented, technical people in my family.

My son Daniel Carleton has been programming since he was 15 or 16. (He learned from some really cool guys at a now super famous tech company, before it became famous.) He makes his living that way and he's super at it.

Screen shot 2012-02-26 at 7.15.45 PMMy two younger brothers are software engineers, too. Mark works for HP/Snapfish, and Tim for a financial services company.

My Dad is not a programmer, but he was into computers when they were still index cards. I wrote a poem in the 1980s about a trip I took with him to NATO in Brussels, where he had a meeting about a computer project he was working on (managing, I think; not coding) that had to do with inventorying parts at airbases around the NATO alliance. "Interoperability," they called it. A word 30 years ahead of its time.

All by way of saying I do not have the technical agility gene. I live inside words, and sometimes I read pictures. I'm from the Arts Quad, and I only crossed the Engineering Campus on my way to the Law School.

Which is why I am thrilled, all out of proportion, to have gotten this site running on Amazon S3.

There's further commentary on the AWS site, which I'm calling Wac6Web, about why I'm doing this.

I didn't learn how to tune automobiles back in the 20th Century. But I want to be more self-provisioning in the 21st.

Michael Atkins' IP Law Reports from China

Trademark attorney and blogger Michael Atkins has been posting recently about a trip he made to China for what sounds like a very intense, 7 day IP law conference.

3756880888_88b531ab0b_zThe kind of conferences lawyers go to in the US typically span one or two days at most. Most often, attendees leaf indifferently through presentation materials in three ring binders while presenters grimly read the words off a powerpoint deck.

But Atkins describes a conference where the participants worked, ten hours a day, over seven successive days.

He reports that Chinese judges and lawyers are committed "to developing best practices in intellectual property law." And that Chinese judges and lawyers are dealing with some of the same issues US judges and lawyers are dealing with:

"Chinese IP judges are struggling with the same IP issues our courts are struggling with. One judge commented that China has decided cases involving online auctions and keyword advertising similar to Tiffany and Rosetta Stone. With a huge IP docket, it’s no wonder China’s top judges are at the intersection of law and technology much like some of our judges are here."

Perhaps the most interesting point in Atkins' reporting is that China seems to be adopting the "famous brands" legal doctrine  - something the US has been asking China to do, in order to extend legal protection for US brands even in places where they do not do business (yet).

This is ironic, Atkins points out, insofar as the US itself does not (always) do the same for the famous brands from other nations that are (arguably) usurped in the US. He cites the case of "a famous Indian restaurant with no U.S. presence against a copycat restaurant that opened in New York," which the Second Circuit decided against the famous Indian brand. "The Second Circuit held no U.S. trademark rights means a foreign trademark owner can’t prevail here — precisely the opposite conclusion we’re encouraging China to adopt," Atkins notes.

Chinese judges read key opinions of US courts, Atkins says, and he reports that one high judge in particular said Chinese judges would read even more, were more American judicial opinions translated into Chinese.

"Note to the U.S. government," Atkins writes. "[I]f you want to influence thinking in the Chinese judiciary, translate important U.S. cases into Chinese."

Photo: "Court of Customs and Patent Appeals Reports (Patent Cases) in a large DC law library," by Mr. T in DC.

Crowd-drafting legislation via Reddit (the Freedom of Internet Act)

Reddit users are drafting proposed legislation to protect the internet and what people do on and via the internet.

Card16AIt's called, the "Freedom of Internet Act."

At first, that sounds wrong, syntactically, but if you dwell on it, "internet" starts to function as a verb, which is interesting. Like "worship," or "speaking."

Here's the sub-reddit that helps catch up with the latest and greatest on the effort.

The draft takes a dim view of prior restraint. This from Title II, Article I, Clause B:

"Censorship may only be enforced after illegal material has been found, and no steps can be taken to monitor data being uploaded."

The problem of assessing when derivatives of copyrighted work should be censor-able is handled, in part, as though it can be quantified. This from Title II, Article II, Clause B(2):

"If the new products are released as a series of parts then combined content should contain at a minimum of 40% of the original content to be illegal content."

There is an unflinching mens rea component here. That is to say, you can't be culpable for violation of the Act unless you actually know, ahead of time, that what you are doing is illegal. This from Title II, Article II, Clause E:

"No user shall be held liable for the upload of data unless it can be shown that the User has certain knowledge that the data was not legal to upload in the country or countries where the upload was initiated and/or completed."

If the Act passes in its current form, gone will be the days when web services can simply take down user content without notice. This from Title II, Article IV, Clause B:

"Notice must be given to an administrator of the information system and to the uploader of the content if possible at least 30 days in advance of any deletion of data from any information system or service, or within 24 hours of the transfer of the data in question from publicly accessible storage to privately accessible storage."

Privacy is important to the drafters. This from Title II, Article VII, Clause A:

"1) No data collected by an Information System under claim that it is collected to help the user to use the service (for example mobile numbers to aid password recovery) may be demanded, used or shared in a way that may lead to the user losing their anonymity.
"2) Information systems have to explicitly specify the data that they may use and share to help in identifying the user, the IP address is excepted from this and is bound by condition in Article V [B.1]."

Even "[m]onitoring of traffic inside of an anonymizing network is prohibited." (Title II, Article VII, Clause D(2).)

Drafting legislation is a good thing for citizens to do, a skill to develop. Just as you don't really address tricky legal and business issues until you move from the bullet point list or term sheet into drafting the definitive contract, so, too, do you not really have to surface the nuance and start making hard choices in policy matters until you put quill to parchment.

Photo: "a leaf of the Corpus iuris civilis . . . used to cover . . . volume of legal statutes from the Duchy of Savoy"; Yale Law Library, Rare Books Blog.

What Do Angels Think of Crowdfunding?

What do angel investors think of the prospect of a new crowdfunding securities exemption? Good news, or bad?

It depends on the angel you ask.

I wanted to find a way to articulate the range of reactions I've been hearing from angels, in the months since a crowdfunding exemption first gained traction in Congress.

So, late Wednesday afternoon, I emailed a three-question SurveyMonkey poll to fourteen currently active angel investors. Eight have responded as of this writing (Thursday afternoon).

The poll, and the answers, are still very much in the realm of the anecdotal. But the results help me focus a bit better on how any crowdfunding exemption might better overlap with the Reg D Rule 506 paradigm to which serial entrepreneurs, angel investors and startup lawyers are accustomed. (I still think crowdfunding deals, to work, have to be set up in a way that bypasses lawyers.)

The results, and some interspersed commentary, below:

Survey Question 1

While angels are likely to have a generally positive view of crowdfunding, some feel strongly that crowdfunding should not extend to the sale of stock in startup companies. "In general, I think it’s a bad idea," one of the survey respondents wrote. "These are highly risky assets."

Survey Question 2

One respondent told me that the the interests of entrepreneurs should come first. "I am in favor of crowdfunding because I think it will help entrepreneurism to flourish. I also realize that it may create competition for the angel investors however."

Survey Question 3

Last comment from another of the respondents, who is generally okay with the idea but not convinced of the need: "I really don't think there's a shortage today for funding good ideas."

Outing Startup Legal Docs

The prominent law firm, Gunderson Dettmer, is populating the Docracy site with templates for startup legal documents!

As of this writing, forms Gunderson Dettmer has posted include IP assignments, consulting agreements, NDAs and an employment offer letter.

800px-Safecracking-Drill-RigThis could be a very big deal.

Here's what I think is significant:

Rather than post forms to its own site or other platform tied in with the firm's branding, Gunderson is entrusting a third party with custody of the docs and, presumably, with the expectation that they will be subject to open curation.

I am not saying that Docracy is or is not the perfect platform - I don't understand their business model just yet - though I heartily applaud Docracy for taking the dream farther than anyone else to date. But whatever the eventual, optimum landscape for openly sourced legal docs may turn out to be, moving the activity to a venue independent of any single law firm is the necessary first step.

Imagine other firms do likewise. It would blow the doors off the virtual Victorian safes in which law firms sequester legal templates.

From my brief experimenting with the Docracy site, I take it that the forms they host are typically set up so that they can not only be accessed and downloaded, but also edited. In the case of the Gunderson forms, it looks like the editing function, per se, has been removed, though a "branch" function is retained, that appears to permit you to create a variant based on the Gunderson form. I need to experiment further with this (maybe I will attempt to make a "branch" of the employee IP assignment doc that would include a notice required by Washington law). 

It is essential to the cause of open sourced startup legal docs that the hosting platform and the contributing law firms permit others to edit, mash up, borrow from, and otherwise iterate at will. Total freedom is the manner in which we will be able to both verify standards and measure degrees of variation.

Docracy seems to be set up for the use case that people will want to sign and deliver documents through the service. Perhaps that is how Docracy currently plans to make money - from transaction fees on signed and delivered deals. To me, that is less interesting than the availability of the forms, and the promise that the forms may be freely manipulated.

Suppose DLA Piper, Cooley, Wilson Sonsini, and one or two other firms get all their comparable forms up there. Then Kingsley Martin (or others following his lead) could put his (their) software to work, and we might end up with a mash up of an actual, definitive, industry standard for each form.

More to think and write about this subject. More to come.

Photo: Jon Lorquet, Wikimedia Commons.

Related Posts with Thumbnails