david with goliath: how big companies do deals with small cloud and social media companies
DESCRIPTION
Conventional deal structures do not always work when big companies engage small cloud and social media companies as part of marketing and digital business. To go live you need to go smart. Legal documents need to enable, not delay. Due diligence is important: Are you picking a winner or a loser? Would you invest in this company? Is security backed in or will you be subject to a privacy breach and a reputational hit? Are the investors in it for the long haul or are they taking a flier?TRANSCRIPT
David with Goliath: How Big Companies Do Deals With Small Cloud and Social Media Companies
William A. TanenbaumHead, IP &Technology Transactions Group, Kaye Scholer LLP
Copyright © 2014 by William A. Tanenbaum and Ross Docksey. All Rights Reserved
Kaye Scholer LLP
• The law firm’s IP & Tech Transaction Group is ranked in the “First Tier” Nationally by US News & World Report and is “one of New York City’s most outstanding transactional IT practices.” (Chambers).
• 14 other Practice Groups also ranked in First Tier • 14 Practice Groups and 48 Lawyers are Ranked in Chambers
USA and others in Chambers ina Europe and China where firm has offices
• Practice Head Bill Tanenbaum named “Lawyer of the Year 2013” in IT In New York
• Our offices are in New York, Palo Alto, Chicago, Washington, D.C., London, Los Angeles, Florida, Frankfurt and Shanghai
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Selecting a Social Media Company to Do Business With
Are You Picking a Winner or a Loser?
• How strong is the external foundation for your Social Media strategy, your commercial success, and your business reputation?
• Gaining advantage and avoiding harm • Ease of working with Social Media companies • Factors applicable to Social Media companies also apply to
Cloud providers and other small companies• Silicon Valley vs. New York = tech company vs. x/tech
company
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To Due Diligence the Company, You Have to Due Diligence the Investors
• How financially committed are the investors? – Are they committed to providing continued funding, or are they taking a
flyer and ready to walk away quickly?
– What is their track record with other companies?
• Do they understand the space? • Are they a cohesive team with a shared strategy? • Are they providing management guidance? • Are they open to due diligence?
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Management Team • How experienced and well is it in running the business? • What is the burn-rate? • Attracting and keeping talent? • Have they had prior success? • Know the space? Strategic plan? • Attention to IP
– Offensive IP
– Defensive IP
– Strategic alliances
– Upstream licenses
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Customer Support
• Can the Social Media company provide the customer support the big company needs?
• Can it provide 24/7 support? • Is 24/7 actually needed? • Can small company provide support in languages other than
English for multinationals? – Help desk requirements are often from users who do not speak English
well
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Cyber-Security Risks
• Unappreciated risk in doing business with Social Media companies
• Often build user base without sufficient attention to security features
• Data breach and theft of PII will harm big company’s relationship with its customers
• Monetary damages• Have you bought a reputational risk?
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Obstacles to Doing the Deal
What are the Business and Legal Hurdles?
• Mismatch between contract processes– Length of documents
– Resources
– Speed to closing
• Misunderstanding of regulatory requirements• Internal business/legal approval processes internally at big
company • Small company lawyer is the investor’s lawyer not an
IT/IP/social media lawyer
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Addressing the Obstacles
Surmounting the Hurdles
• Big companies: consider shorter agreement than standard agreement
• Recommend attorney to small company to get quality on other side
• Publish guide to applicable regulatory requirements that small company needs to know are unavoidable
• Explain big company’s internal process to small company
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Surmounting the Hurdles, cont’d
• Big company can re-engineer internal and external processes– Digital business layer atop vertical business units
• Adopt shorter contracts, rely on SOW and SOWs– Involve legal department early regarding core legal terms
– Risk, warning, remediation, relationship/partnership
– Avoid avoiding legal department
• Success is reputation not just price• Assume big company cannot negotiate changes to the
contract: then need due diligence equivalent to buying the company
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IP Does Matter
Business Requires IP Focus
• IP is important – Big companies need IP ownership or license rights
– Rights should be based on business drivers
• Are there custom software or configurations? – Competitive advantage requiring proprietary rights?
• Address need to data and tech across different or successive social media/digital business initiatives – Including Big Data, analytics software, derivative data sets
• When to use contracts to modify default statutory IP rules, and avoid unexpected business problems
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Employee Training
Do Not Let Lack of Training Trump Digital Business Success
• Training sessions for both small and big companies • For big companies, internal social media training
– Avoid inadvertent but expensive regulatory violations
– Avoid missing customer expectations
• Outsourcing as a firewall
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Questions and Answers
William A. Tanenbaum
Head IP & Technology Transactions Group
Kaye Scholer LLP, New York and Palo Alto Offices (not admitted in California)
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William A. Tanenbaum, Kaye Scholer LLP [email protected]
• Bill Tanenbaum is the Head of the law firm Kaye Scholer’s multidisciplinary, multi-office IP & Technology Transactions Group, which is ranked in the First Tier at the National Level by US News & World Report/Best Lawyers. His practice areas include outsourcing, IT, offensive and defensive IP strategies, vendor management, data security and data flows, IT and IP aspects of corporate transactions, technology agreements and licensing, Big Data in procurement and supply chain management, and sustainability. Bill was named “Lawyer of the Year 2013” in IT in NY by Best Lawyers in America. He is ranked in Band One in Technology & Outsourcing in NY by Chambers, America’s Leading Lawyers for Business, which found that he “built one of New York City’s most outstanding transactional IT practices.” IP Law Experts Guide named Bill as “The Recommended IT Lawyer in New York.” (Only one attorney is designated in each state.) He is past President of the International Technology Law Association and currently a VP of the Society for Information Management (NY), a CIO industry association where he serves as the only lawyer on the Board. He is: “one of the best IP attorneys I have worked with” (LMG CleanTech Guide), “smart, practical, tactical and highly strategic,” “an effective negotiator” (Chambers), “intellectual yet pragmatic” and “among the foremost IT licensing experts and a leading authority on related issues such as data security, privacy and social media” (World’s 250 Leading Patent and Technology Lawyers).
• Bill is a graduate of Brown University, Cornell Law School and the Bondurant School of High Performance Driving.
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