Chicago Business Lawyer Blog

We were excited to learn about recent news for our client Bodacious Enterprises, Inc., which we assisted in starting up earlier this year. They are making progress and moving forward very rapidly.

Bodacious was formed when one of the principals purchased and was greatly impressed by an item of Goodnighties wicking and recovery sleepwear. After that positive experience, we helped Bodacious negotiate an exclusive sales represenative agreement with the manufacturer in order to manage marketing and sale activities.

Starting this week, Bodacious and Goodnighties have launched their first television infomercial and advertising campaign on the Hallmark, ion Life, AMC and other women-oriented cable channels. In conjunction with this, there is a special offer available to purchasers at www.buygoodnighties.com.

In another development, Bodacious and Goodnighties also are featured in the December 2010 edition of Chicago Northshore's Make it Better magazine and website. There's a special offer there for readers.

Congratulations and Good Luck to our client Bodacious!

North Shore business lawyer Jeremy A. Gibson is experienced in all aspects of start-up, distribution, sales representative, marketing and advertising legal issues. He would be happy to discuss your Chicago corporate law questions and concerns at offices in the Loop, Deerfield, Oak Brook, O'Hare and Schaumburg areas.

This week a federal jury in Oakland, California awarded Oracle $1.3 billion in damages from SAP as a result of SAP's infringing the intellectual property of Oracle. The trial was limited to the question of damages. SAP already had admitted that personnel at a now closed Tomorrow Now subsidiary had intentionally gained access to, copied and resold software related to running the data centers of large corporations. SAP also obtained other propriety information and trade secrets, such as manuals and technical support guidance.

The case is stunning in many respects. It is a clear example of blatant copryright infringement and apparently patent infringement. It appears that numerous and senior mananagers at SAP were aware of the subterfuge. And, it demonstrates just how damaging a breach of corporate integrity can be in terms of money, publicity and prestige.

Perhaps, the most interesting aspect is how vulnerable a copyright infringer is if discovered. SAP argued that Oracle's damages should be in the $25 to $40 million range based upon the relatively few customers and amount of income that SAP gained from the effort. Oracles claimed that it would have charged SAP fees amount to as much as $2 billion if it had licensed the software and related materials to SAP. The jury appeared to give much of the benefit of the doubt to Oracle and settled on $1.3 billion, 35 to 40 times what SAP argued.

This reminds me of a case I handled where an advertising and marketing firm made a lengthy infomercial for an appliance that played on national outlets in heavy rotation. The infomercial allegedly included a short bit of background music for which a license had not been obtained. Most likely, the licensor would have charged a very nominal fee if the matter had been negotiated in advance, perhaps less than $50 ro $100. Howevever, after the fact, the licensor was free to demand a fee many, many times that, coupled with potential risks of litigation expenses and treble damages, even though any unlicensed use probably had been an oversight. Accordingly, the client concluded it was worth settling the case promptly for a reasonable amount, but one that was still greatly higher than if a license had been purchased upfront.

The principle in the infomercial case is the same as the one in the SAP trial, the exponentially different sums involved notwithstanding. Be very careful about misappropriating software, music, video or other content that has commerical value. Even if the misuse was inadvertent, if detected, you can now be held hostage for license fees far above an arms length level.

The Chicago intellectual property attorneys of Jeremy A. Gibson & Associates, PC frequently advise companies and employees on legal matters involving software and copyright protection, including trade secret and infringement issues. Our Illinois business and corporate attorneys are available throughout the region to meet at offices in Chicago, Deerfield, Rosemont, Schaumburg and Oak Brook and elsewhere. Please phone or email us to schedule your business law consultation.

Yesterday, I was excited to speak with a writer for Crain's Chicago Business, the pre-eminent regional business newspaper and publisher of ChicagoBusiness.com, on the subject of the April 2010 Comcast case, which endangered the policy of the Federal Communications Commission supporting "net neutrality." The U.S. Court of Appeals ruling essentially held that regardless of the desirability of the FCC's goal of limiting broadband companies interference with relatively equal access to, use of and pricing for the Internet for all, it was not clearly authorized by federal law. The interview is for an upcoming special issue in December on important trends.

For a good summation of the background, policies and challenges involved in regulating the Internet, I recommend reviewing The Third Way: A Narrowly Tailored Broadband Framework, which is a May 6, 2010 statement prepared by Julius Genachowski, Chairman of the FCC. He summarizes the legal issue as follows:

The recent court opinion in Comcast v. FCC does not challenge the longstanding consensus about the FCC's important but restrained role in protecting consumers, promoting competition, and ensuring that all Americans can benefit from broadband communications. Nor does it challenge the commonsense policies we have been pursuing.

But the opinion does cast serious doubt on the particular legal theory the Commission used for the past few years to justify its backstop role with respect to broadband Internet communications. The opinion therefore creates a serious problem that must be solved so that the Commission can implement important, commonsense broadband policies, including reforming the Universal Service Fund to provide broadband to all Americans, protecting consumers and promoting competition by ensuring transparency regarding broadband access services, safeguarding the privacy of consumer information, facilitating access to broadband services by persons with disabilities, protecting against cyber-attacks, ensuring next-generation 911 services for broadband communications, and preserving the free and open Internet.

The legal theory that the Comcast opinion found inadequate has its roots in a series of controversial decisions beginning in 2002 in which the Commission decided to classify broadband Internet access service not as a "telecommunications service" for purposes of the Communications Act, but as something different--an "information service."

As a result of these decisions, broadband became a type of service over which the Commission could exercise only indirect "ancillary" authority, as opposed to the clearer direct authority exercised over telecommunications services. Importantly, at the time, supporters of this "information services" approach clearly stated that the FCC's so-called "ancillary" authority would be more than sufficient for the Commission to play its backstop role with respect to broadband access services and pursue all sensible broadband policies.

The Commission's General Counsel and many other lawyers believe that the Comcast decision reduces sharply the Commission's ability to protect consumers and promote competition using its "ancillary" authority, and creates serious uncertainty about the Commission's ability, under this approach, to perform the basic oversight functions, and pursue the basic broadband-related policies, that have been long and widely thought essential and appropriate.

Although the legal underpinning has been threatened, the Chairman believes there is widespread acceptance of the FCC's approach:

Over the past decade and a half, a broad consensus in the public and private sectors has developed about the proper role and authority for the FCC regarding broadband communications. This bipartisan consensus, which I support, holds that the FCC should adopt a restrained approach to broadband communications, one carefully balanced to unleash investment and innovation while also protecting and empowering consumers.

It is widely understood--and I am of the view--that the extreme alternatives to this light-touch approach are unacceptable. Heavy-handed prescriptive regulation can chill investment and innovation, and a do-nothing approach can leave consumers unprotected and competition unpromoted, which itself would ultimately lead to reduced investment and innovation.

The consensus view reflects the nature of the Internet itself as well as the market for access to our broadband networks. One of the Internet's greatest strengths--its unprecedented power to foster technological, economic, and social innovation--stems in significant part from the absence of any central controlling authority, either public or private. The FCC's role, therefore should not involve regulating the Internet itself.

Consumers do need basic protection against anticompetitive or otherwise unreasonable conduct by companies providing the broadband access service (e.g., DSL, cable modem, or fiber) to which consumers subscribe for access to the Internet. It is widely accepted that the FCC needs backstop authority to prevent these companies from restricting lawful innovation or speech, or engaging in unfair practices, as well as the ability to develop policies aimed at connecting all Americans to broadband, including in rural areas.

I am cautiously optimistic that, given the pervasive and fundamental importance of the Internet in the daily life of most Americans, the legal foundation for the FCC's views and policies will be solidified eventually.

Jeremy A. Gibson is a metropolitan Chicago Internet, technology and e-commerce lawyer with substantial expertise in the domain name registration, trademark, marketing, privacy, security, contract and other legal aspects of conducting business online. We would be pleased to discuss your Illinois Internet law or technology law questions or needs. We have a variety of convenient Chicago corporate attorney law office locations and we work with businesses throughout the northern Illinois region, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette.

As a former journalist, one of my most persistent and consistent rituals is as leisurely reading of the Sunday newspaper (print version preferably) as circumstances permit. Over the years, I enjoy the Corner Office feature of the New York Times business section, where CEOs and similar types discuss their career and leadership experiences.

This past Sunday's column featured a particularly succint summary of how to run an organization effectively from Shivan S. Subramaniam, chairman and CEO of FM Global, an insurance company. His message resonates with my own experiences as a member of three different firms and a litigator handling commercial lawsuits. The bottom line is honing the message and priorities, communicating them and then trusting people to implement them, even if they do so in their own style.

Asked about early leadership lessons, Mr. Subramaniam noted:

One is that people don't necessarily do things the way you would do them. And if they don't follow precisely the way you think about something, that doesn't necessarily mean that they're wrong. That took some maturity to understand -- also, that not everybody will behave the way you behave.

But the bigger picture is to make very sure that everybody in the company has the same goal in mind. That was always the more important thing I learned over time. It matters less what people do or how they do it, but do we all agree on the same goals?

Over the years, that has led to us having very simple goals at our company. We call them "key result areas" or K.R.A.'s. We're multinational -- we've got 5,100 people, 1,800 of whom are engineers. We're very analytical. But we have three K.R.A.'s, nothing terribly fancy. And everybody focuses on them. One is on profitability. One is on retention of existing clients. And one is on attracting new clients. That's it.

You can talk to people in San Francisco, Sydney or Singapore, and they'll know what the three K.R.A.'s are. All of our incentive plans are designed around our K.R.A.'s, and every one of those K.R.A.'s is very transparent. Our employees know how we're doing. And, most importantly, they understand them, whether they're the most senior manager or a file clerk, so they know that, "If I do this, it helps this K.R.A. in this manner."

As a related point, Mr. Subramaniam commented on learning something from one of his imporant role models:

He's the one who really started to teach me about the importance of simplicity. Things like, "If you can't explain it to me in a couple of sentences -- what the idea or what the concept behind it is -- it's obviously something you don't know how to do. If you've got to write a whole page to describe something, that doesn't make a lot of sense."

In concluding, Mr. Subramaniam distilled and explained his management philosophy:

My philosophy of leadership is that four or five of us can come up with a much better decision than just I can alone. And if you follow that philosophy, you'll probably have a very good, talented management group around you. People can always perform a whole lot better than how you think they're going to perform. You need to really give them the opportunity to do that.

Ultimately, Mr. Subramaniam's remarks, which emphasize the importance of what's important and not being a micromanager, reminded me, oddly enough, of a similar dynamic in learning how to deal with commercial litigation.

One of my very first tasks as a new Chicago business lawyer was to advise a client with a small business on a busy street about his rights when a contractor installed a new driveway with some imperfections and variances from the specifications of construction contract. I found out that a court was unlikely to take action if there had been "substantial performance" of the agreement and something along the lines that "the law does not trifle with trivialities." So, I learned how to tell a client something that he or she did not want to hear, but was in his or her own best interest: "relax."

Ever since then, that has informed my approach to evaluating performance, whether in terms of an employee or other party to in a contract or business law dispute. Usually, if the important things have been covered, even if not quite perfectly or exactly how you would do it, then that's pretty good.

Jeremy A. Gibson is an experienced Chicago corporate lawyer, who handles the preparation, negotiation, interpretation and implementation of contracts and agreements for small and large businesses. In addition to the Loop, he is available to meet about business law matters in Deerfield, Oak Brook, Rosemont, Schaumburg and elsewhere.