Your Attorney Doesn't Run Your Company

Who's in Charge?

A lot of executives and startup owners seem to think that "my attorney won't let me" is a sober, business minded way to negotiate contract terms. All it does for me is make me wonder whether the other party to the negotiations is really the decision maker. The last thing I want to do is sign a contract with someone who always has to get approval from the company lawyers.1

A recent email exchange with the CEO of a startup provides an excellent example.

Terms

To setup, I've been asked by a startup to help them integrate an open-source project, based on open standards, into their project. Not a lot of patent-able possibilities here. Still, the CEO wants me to sign a contract that gives his company full ownership of everything I write for them unless it comes from my own code libraries.

Typically I don't sign contracts with "work-for-hire" provisions.2 Given the nature of the work I thought perhaps I'd make an exception. Then I read the contract. What a mess. Here's a sample:

You also hereby forever waive and agree never to assert any and all moral rights you may have in any part of the Work Product even after termination [of] this Agreement.

Seems reasonable, right? Not so fast. Look at what it's missing. What's the scope of the provision that I will never assert any "moral rights" I may have in the Work Product? Is it just the company I'm contracting with or the world? Could I assert said "moral rights" against some other company or individual who didn't have a license to code from my libraries? Beats me.

Moral What?

Notice also the term "moral rights". That's not a term used a lot in the US. Copyright has a legal definition in the US. Moral rights not so much. In Europe Droit Moral covers an author's right "to control the eventual fate" of almost any work.3 In the US it refers to the rights of authors of visual works.4 As far as I know, US programmers writing code can't avail themselves of that section of the copyright code.

That might be fine if the contract defined clearly what "moral rights" mean. It doesn't. Worse, the contract uses the terms copyright and intellectual property rights in addition to and instead of moral rights in other places.

So what am I agreeing to? Hard to say. My best guess is a reasonable judge (or jury) would read it to mean I'm agreeing not to assert my moral rights against the company I'm contracting with. The only way to be certain, once signed, would be to test it in a court of law. That's an expensive solution when we could clarify the clause now.5

Therein Lies the Rub

I told the CEO of the startup I had grave misgivings about the contract and would like to clear them up before moving forward. He responded:

The contract cannot be modified further as our council, [name removed], won't budge on IP.

Apparently "IP" attorneys run his company.

Top Men and Just So Stories

I don't really think the attorneys at Dewey, Cheetham and Howe run the company. Statements like "our attorneys won't let us" or "the shareholders would skin us alive" are red herrings, what I like to call "just so stories". They're not the real reason. They're meant to provide a veneer of plausibility -- and perhaps, in this case, emphasize how seriously the CEO takes "intellectual property rights" -- while ending discussion.

What's a Just So Story?

Just So Stories is the title of a book by Rudyard Kipling. They're a collection of preposterous stories for children explaining things like how the whale got his throat or the elephant his trunk. They're the kind of fantastic stories parents tell their children after a long day of "Why?"

Top Men

Of course we can't use fantastic tales in the adult world so we tell serious, more plausible stories.

You may remember the end of Raiders of the Lost Ark. Indiana Jones saved the ark and got the girl. Now he's ready to do research. So, where is it? Where's the ark. The reply from the g-men? It's being worked on by top men. "Who?", the world-renowned scholar asks? "Top Men" comes the reply. End of discussion.

But Your Honor...

But in the world of contracts it's not the end of the discussion. Just-so stories aren't a defense in a court of law. And law is what contracts are about. An unconscionable clause might be thrown out by a judge but not all bad contracts are unconscionable. They're very often enforceable...and expensively so.

By All Means, Get Counsel...

I'm not suggesting we forego the benefits of legal counsel. Lawyers have a part to play in business negotiations. They (should) know what the law allows, what it requires and how to articulate the terms of the agreement.

Knowing The Law

A good lawyer knows what can be negotiated and what can't. Business dinners (within reason) are lawful; bribery (in the US anyhow) is not.

A good lawyer can also advise on lawful obligations. Company car, optional. SEC filings, depends on the company. Payroll taxes, definitely.

Getting the Language Right

One area where lawyers are especially helpful is in writing the terms of the agreement.

If you read a good contract it's like source code. It defines the terms, specifies who does what and when and finally what happens when things go wrong.

Writing a contract isn't rocket science. But it's not easy. Every field has specialized language that may mean to the members of that field something more (or less) than to a layman. Legal language is no different. It's a highly specialized language for describing agreements. Get it wrong and bad things happen.

The process of writing a contract forces all parties to consider what their expectations are and what obligations they're willing to accept. If you can articulate the preceding you may not need much of a lawyer's time. I suspect most of what they do is ask the clarifying questions that drive the thinking process. The rest is translating into legalese.

...But Make Your Own Decisions

Never forget: an attorney's job is to advise and give counsel. It isn't to run your business.6 Tell your attorney your goals. Listen to his advice. And then make your own decision--even if your decision is to follow his advice word-for-word. Make it yours.

And for pity's sake, don't hide behind your attorney's coat tails. If you want something a particular way, own it. Take responsibility for your decision. Don't offer lame, mealy-mouthed excuses.

Postscript

I can't say where this particular consultation job will go. Probably nowhere. I can say I'm not going to sign a bad contract. That's my decision. No attorney required.

Footnotes


  1. I suppose it could be worse. The owner/ceo/executive might have to consult the company astrologer.

  2. Why I don't consult "work-for-hire" will have to wait for another blog post.

  3. Betsy Rosenblatt, "Moral Rights Basics", Harvard Law School website, 1998.

  4. 17 U.S.C §106A is the relevant part of the law. Note, the statute doesn't use the term moral rights.

  5. Sadly this wasn't the only instance of ambiguity.

  6. If your attorney is so good at running your business ask yourself this: why haven't I made this guy CEO and moved to the Bahamas?