The Obama administration’s handling of the Russian spy swap was a pretty impressive display of competent dispute management. See the Times wrap-up story, which reports that officials:

• compiled a detailed presentation of incriminating evidence;
• avoided chest-beating that could have provoked a like reaction and made a resolution that much more difficult;
• swiftly let the Russians know what evidence they had, showing enough of their cards to quickly convince them their spies had been caught dead to rights;
• knew what they wanted to achieve, namely a prisoner swap.

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• A better way to handle a breach of contract (at least in some cases)

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When the Sarbanes-Oxley Act was enacted back in 2002, lots of lawyers and business execs predicted that it would cost a lot, that it would be a huge burden, etc., etc. According to a recent survey, however, says the NY Times Dealbook blog, “70 percent of the more than 400 respondents who have put into place accounting controls required by Sarbanes-Oxley at their companies said that the benefits outweighed its costs.” (Hat tip: Ethisphere.)

When Sarbanes-Oxley was enacted, I was the general counsel of a publicly-traded software company; I was pretty involved in our first Section 404 internal-controls assessment, which was spearheaded mainly by our top-flight chief accounting officer. Certainly in the short run the Act was a pain. It seemed clear to me, though, that in the long run the Act would compel businesses to make sure they had a good handle on their operations, and that couldn’t help but be good for business.

From my own professional perspective, I thought the Act would be a godsend for in-house counsel — it would make it easier for them to say no to overly-aggressive business people without coming across as “Dr. No,” someone who wasn’t a team player. (I hasten to add that I never had to deal with that kind of problem at my former company.)

See also: (list is automatically generated)

• Responsibilities of attorneys and other M&A professionals after the Sarbanes-Oxley Act – Byron Egan
• Leading off with a “killer” contract form document might be a bad idea
• Adelphia Vendors Motorola, Scientific-Atlanta Implicated in Executives’ Securites-Fraud Trial

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If you’re an employee of a company, and you sign a company contract as just “John Doe,” you might end up being held personally liable for the company’s obligations. (If you’re the owner of the company as a sole proprietor, or the general partner of a partnership, you probably will be personally liable in any case.)

A better way to sign a company contract is to have the signature block:

• clearly indicate that it’s the company, not you personally, that is agreeing to the contract, and that you’re simply signing on its behalf; and
• stating your title.

The wrong way to sign a company contract

A better way

Further reading

• Protecting the Deal Professional from Personal Liability for Contract-Related Claims, by Glen D. West, of the Weil Gotshal firm.

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• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for
• Clients seem to like Webcam video conferences, with on-line document sharing, better than traditional on-site meetings
• An oral understanding might not get you off the hook for a written contractual obligation

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Chances are that at some point in your career, a lawyer — yours, or someone else’s — will want to review notes you took at a meeting or during a phone conversation. So thinking ahead to that possibility, whenever you take notes, you should routinely do as many of the fol­low­ing things as you can remember, especially the first three things, to increase the odds that a later reviewer will get an ac­cur­ate picture of the event. It will help you stay out of un­de­served trouble and save money on legal fees

1. Indicate who said what you’re writing down.  Unless you want to risk having someone else’s statements mistakenly attributed to you, indicate in your notes just who has said what.  EXAMPLE:  Suppose that John Doe says in a meeting that your company’s off­shore oil-well drilling project can skip certain safety checks. Re­mem­ber­ing the BP drilling disaster in the Gulf of Mexico, you don’t want anyone to think you were the guy who sug­ges­ted this. So your notes might say, for example, "JD: Let’s skip safety checks,"; if you omitted John Doe’s initials, it wouldn’t be clear that you weren’t the one who made his suggestion.
2. On every page, write the meeting date and time, the subject, and the page number. The rea­son: Your lawyer will probably want to build a chronology of events; you can help her put the meeting in­to the proper context by “timestamping” your notes. This will also reduce the risk that an unfriendly party might try to quote your notes out of context.
3. If a lawyer is participating, indicate this.  That will help your lawyer sep­ar­ate out documents that might be protected by the attorney-client privilege. EXAMPLE:  “Partici­pants:  John Doe (CEO); Ron Roe (ABC Consulting, Inc.); Jane Joe (general counsel).”
4. Start with a clean sheet of paper.  When copies of documents are provided to opposing counsel, in a lawsuit or other investigation, it’s better if a given page of notes doesn’t have un­re­la­ted in­for­ma­tion on it.  This goes for people who take notes in bound paper note­books too: It’s best to start notes for each meeting or phone call on a new page, even though this means you’ll use up your note­books more quickly.
5. Write in pen for easier photocopying and/or scanning, and also because pencil notes might make a reviewer (for example, as an opposing counsel) wonder whether you might have erased anything, and perhaps falsely ac­cuse you of having done so.
6. Write “CONFIDENTIAL” at the top of each page of confidential notes. That will help preserve any applicable trade-secret rights; it will also help your lawyer segregate such notes for possible special handling in the lawsuit or other investigation.
7. List the participants. Listing the participants serves as a key to the initials you’ll be using, as discussed in item 1 above.  It can also refresh your recollection if you ever have to testify about the meet­ing. If some people are participating in an in-person meeting by phone, indicate that. Indicate each participant’s role if isn’t ob­vi­ous or well-known – remember, you might know who someone is, but a later reader likely won’t.  EXAMPLE:  “Partici­pants:  John Doe (CEO); Ron Roe (ABC Consulting, Inc.); Chris Coe (marketing).”
8. Indicate the time someone joins or leaves the meeting, es­pe­ci­al­ly if it’s you (so that you’re not later accused of having still been there if something bad happened after you left).
9. Write down the stop time of the meeting. This usually isn’t a big deal, but it’s nice to have for completeness.

See also: (list is automatically generated)

• How to sign a company contract without incurring personal liability
• Clients seem to like Webcam video conferences, with on-line document sharing, better than traditional on-site meetings
• Forget short contracts – focus instead on short clauses

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In one of those smack-your-forehead moments, I realized that there’s an obvious fifth ques­tion to be added to yesterday’s list of four ques­tions that should be asked at every business meeting (which as a re­sult would now have the acronym GPPPA):

• Goals: What are we trying to achieve in this project or relationship, and why? [In some circumstances, Toyota's Five Whys drill-down analysis might be helpful.]

I’ve updated the original posting accordingly.

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• G-PP-AA: Five questions to ask at every business meeting you ever attend

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Well-trained software sales people know not to promise a customer that the customer will get a forthcoming upgrade for free when it is released. Under software-accounting guidelines known as SOP 97-2, when a vendor makes such a promise, the earnings process for the sale won’t be deemed complete until the vendor provides the free upgrade — which in turn means, under generally-accepted accounting principles (GAAP), that the vendor must defer recognizing the sale’s revenue until the upgrade is shipped.

Microsoft’s fiscal third-quarter earnings release illustrates this principle. The company reported that it was deferring $305 million in Office 2007 revenue, because it has promised customers who buy Office 2007 that they will get a free upgrade to Office 2010 when it becomes available.

I’m sure, though, that Microsoft would much rather make the sales now, and get the cash in hand, than have customers defer their purchases until Office 2010 is released. With the cash in hand, deferring ‘official’ recognition of the revenue is a small price to pay not to risk the so-called Osborne Effect — named after a well-known early computer company that went bankrupt, supposedly because its founder bragged about an improved new model that was being developed, causing customers not to buy the existing model, in turn causing the company to run out of cash.

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• Revenue recognition for software licenses and maintenance – overview and links

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Companies often don’t have the bargaining power to get their way in contract negotiations. When that’s the case, they have to think of other ways to help protect their business interests. Imagine, for example, that a customer is negotiating a master purchasing contract with a vendor.

• The customer would love to flatly prohibit the vendor from raising prices without the customer’s consent. But the vendor’s negotiators won’t go along with such a prohibition.
• The vendor would love to have the unfettered discretion to raise the customer’s prices whenever it wants. But the customer’s negotiators insist on at least some protection on that score.

What to do? In no particular order, here are three possible approaches that the parties could consider trying.

Non-discrimination language

A non-discrimination requirement at least brings a bit of overall-market discipline into the picture.

EXAMPLE: Vendor will not increase the prices it charges to Customer except as part of a non-targeted, across-the-board pricing increase by Vendor, applicable to its customers generally, for the relevant goods or services.

COMMENT: Vendor might want to qualify this language, so as to limit how general a price increase must be before it can be applied to Customer.

Advance-warning requirement

An advance-warning requirement can buy time for its beneficiary to look around for alternatives (assuming of course that the contract doesn’t lock in the beneficiary somehow, for example with a minimum-purchase requirement or a “requirements” provision).

EXAMPLE: Vendor will give Customer at least X [days | months] advance notice of any increase in the pricing it charges to Customer under this Agreement.

Transparency requirement

Requiring a party to provide information justifying its action, upon request, can force that party to think twice about doing something, even though it technically has the right to do it.

EXAMPLE [UPDATED]: If requested by Customer within X days after notice of a pricing increase, Vendor will seasonably provide Customer with documentation showing, with reasonable completeness and accuracy, a written explanation of the reason for the increase, including reasonable details about Vendor’s relevant cost structures. relevant to the pricing increase. Customer will maintain all such documentation in confidence any nonpublic information in such explanation, will not disclose the nonpublic information to third parties, and will use it only for purposes of making decisions about potential purchases under this Agreement.

COMMENT: Note the if-requested language, which relieves Vendor from the burden of continually managing this requirement — although a smart vendor would plan ahead and have the required documentation ready to go.

The above examples are specific to price increases, but the concepts can be adapted to a variety of needs.

See also: (list is automatically generated)

• How to sign a company contract without incurring personal liability
• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for
• Six tips for negotiating best-efforts obligations

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Some lawyers seem to think that “cease and desist” and “demand” letters should threaten a lawsuit if the other side doesn’t do what’s demanded. It’s been my experience, though, that nothing good ever comes from explicitly threatening to sue:

• Your letter will not cause the other side to suddenly see the light and agree with your position, especially if there’s any uncertainty at all about who’s right. If anything, a threatening letter will often have the opposite effect. (Letters full of bluster always make me think of the screeching-apes scene at the beginning of 2001: A Space Odyssey.)
• Alerted by your threat, the other side might beat you to the punch by suing you — in a court you might have wanted to avoid — for a declaratory judgment that they’re not liable, sort of like the swordsman scene in Raiders of the Lost Ark.
• If you don’t make good on your threat, the other side will conclude that you’re all bark and no bite, which likely will make it more difficult to settle on terms you like.

The better course, I’ve found, is to write the demand letter as a courteous, professional-sounding business letter:

• Briefly describe the problem, in a factual, non-argumentative way — with enough details to educate the other side’s lawyer (your real audience) and keep the other side from later claiming that your notice was insufficient.
• Ask that the other side’s lawyer contact you as soon as possible to discuss the matter.
• If your demand letter is about a breach of contract, emphasize (if true) that your client wants to preserve the business relationship.
• Don’t even hint that you might file a lawsuit.

This won’t guarantee a favorable settlement by any means. But neither will it needlessly get in the way of one.

See also: (list is automatically generated)

• Cease-and-desist letters: Five ways to keep your client and yourself from looking foolish
• Monster Cables picked the wrong guy to threaten
• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for

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A while back I started doing video conferencing with tech-savvy clients, and I’ve noticed that they like it a lot better than on-site meetings.

We’ll do Webcam video conferencing — on short notice, for two minutes or two hours, with no travel time — using free video services from Skype or MSN Messenger or Google or Yahoo.

Simultaneously, we’ll do browser-based screen-sharing using Citrix’s GoToMeeting service, so that the client and I can collaborate on document review and markup in real time. (I pay a flat rate per month for the service as part of my overhead and don’t bill clients for its use.)

Clients prefer this approach because:

• We can do impromptu face-to-face meetings at a moment’s notice.
• I can show the client whatever is on my screen, and vice versa, for easy document review and discussion.
• The clients don’t get billed for my travel time, because there is none.
• There’s no need for a meeting room, nor for a video projector for the computer, nor for coffee, food, etc.
• Being able to see each other makes the video conference more like an in-person meeting, from the perspective of getting to know the client better and cultivating the personal relationship.
• If the client needs to interrupt (or reschedule) the meeting to deal with another matter, we simply adjourn. The client and I can resume the meeting later, without my cooling my heels in their meeting room, and without scheduling another on-site trip.
• For document review, we’ve found that it’s almost never necessary for the client to show me an actual hard-copy document, or vice versa; emailing or IM-ing a Word document or a scanned PDF seems to work fine for most situations. (We’ve used file encryption when security was a particular concern.)

I like video conferencing because I don’t have to spend unproductive time in the car, but instead can work on other matters right up to the time of a video conference, and then again as soon as the conference is over.

EXAMPLE: This past Thursday afternoon, the CEO of a software-company client IM’d me to ask if I was free to go over a draft contract with him. Roughly one minute later, we were doing a Webcam video conference, with both of us also looking at the contract on my computer screen.

The client watched me redline the contract on my machine in real time as we talked. A couple of times, I gave him control of my keyboard so that he could type out, on my computer, exactly what he had in mind. As soon as we finished, I emailed him the redline, which of course he had already reviewed in detail with me.

The client has said that he very much likes the speed and immediacy of this approach. He says it requires fewer turns than doing a series of phone conferences and emailing redlined drafts back and forth.

* * *

I’m sure there are situations where an actual, physical presence would work best.

For day-to-day routine business, however, my clients seem to like Webcam video conferencing better.

See also: (list is automatically generated)

• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for
• How to sign a company contract without incurring personal liability
• Forget short contracts – focus instead on short clauses

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A federal appeals court has ruled that, at least under Massachusetts law, a company that acquired another company’s technology assets, for cash plus an earn-out, was obligated to use reasonable efforts to promote the tech­nology, so that the seller would have a shot at the earn-out payments. See this Law.com article about the First Circuit’s Sonora Scanners case, re­vers­ing and remanding a summary judgment in favor of the acquiring company (discussed on another point in this posting).

See also: (list is automatically generated)

• Kara v. Stamps.com – another illustration of the dangers of going it alone after signing a nondisclosure agreement to see someone’s technology
• Six tips for negotiating best-efforts obligations
• Signing someone else’s name with permission but without so indicating was ‘dishonest’ – 7th Circuit (Posner)

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