Friday, May 02, 2014

          Indispensable, Creative Lawyering in the High-Tech Ecosystem

          In emerging companies, you can assume that when it’s two guys, a dog, and a garage, the first person on the scene will be a lawyer.
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          “Lawyers in the tech sector are creators and facilitators, as opposed to folks just dotting the i’s and crossing the t’s. The top lawyers in town can bring more of a variety of value than any other participant in the technology ecosystem. Lawyers are generally the first person an entrepreneur calls to get started.” --Glen Van Ligten '90, Gunderson Dettmer partner, whose clients include Tumblr.

          When people think of Silicon Valley, the images that come to mind are kids coding day and night on their computers and deep-pocketed investors looking to cash in on what Michael Lewis called “the new new thing.”

          But beneath the circuitry and pitches lies a network of some of the nation’s smartest lawyers, part of a legal ecosystem that has fueled and sustained Silicon Valley’s innovation engine.

          They include tech veteran Glen Van Ligten ’90, who is also an adjunct professor at UC Hastings. After nearly 22 years of practicing law in the Valley, Van Ligten is part of an elite group of legal professionals who have built their careers shepherding the technology startups and global high-tech companies that have sprouted in the fertile ground of Silicon Valley.

          “Lawyers in the tech sector are creators and facilitators, as opposed to folks just dotting the i’s and crossing the t’s,” Van Ligten says. “The top lawyers in town can bring more of a variety of value than any other participant in the technology ecosystem. Lawyers are generally the first person an entrepreneur calls to get started.”

          Van Ligten’s firm, Gunderson Dettmer, one of Silicon Valley’s top law firms focusing on emerging growth companies, has been behind some of the most successful startups in the country, including Tumblr, the microblogging site that was acquired by Yahoo! for $1.1 billion in July 2013. The complex role that he and other Valley lawyers play, Van Ligten notes, “is part legal adviser, part therapist, and part business adviser.”

          Those embedded in the tech sector say that if you can think like an entrepreneur, embrace technology, tolerate risk, and be creative, there is no better place to practice law today. Whether they’re corporate attorneys, IP specialists, or tax practitioners, lawyers have become an integral part of every technology company’s life cycle. They are involved in everything from incorporation, public offerings, and mergers and acquisitions, to protecting and enforcing intellectual property; they also often craft the most advantageous corporate structures and tax strategies.

          Jon Gavenman ’91, a partner in Cooley’s emerging companies practice, agrees. Gavenman, a veteran Valley corporate lawyer, says that the “vast bulk” of the business world does not work the way the startup sector does. “In emerging companies, you can assume that when it’s two guys, a dog, and a garage, the first person on the scene will be a lawyer,” Gavenman says. “We are there not just on the ground floor but when it’s still a patch of dirt.”

          Outside the Box

          In the startup environment, lawyers like Gavenman and Van Ligten play a key role as matchmakers. They spend their time not just giving legal advice but also helping companies refine their business plans to make them more attractive to investors. “Every time I email a VC, I’m putting myself out there,” Gavenman says. “In the tech universe, your name distinguishes you based on the quality of referrals you make.”

          Gavenman has many stories to tell about founders nearly “throwing in the towel” after months, if not years, of trying to gain traction for their business ideas and failing to get funding. He remembers encouraging one frustrated client to try for another few weeks before giving up. “Within a week and a half, the company got a term sheet for its first round of financing, and we sold it a few years later for an undisclosed amount but a lot of money,” Gavenman relates. The career notoriety and money his client received had a “life-changing” impact on the people involved.

          “When you watch people work as hard as entrepreneurs work, and you work alongside them the whole way, and the vision comes to fruition, and the lives of the people at a company are positively altered, it’s like having a hand in helping a group of people win a lottery. It is a tremendously rewarding moment,” Gavenman says.

          Patents play a key role in courting investors. “Usually, early-stage companies have no products. All they have is intellectual property, so we need to be strategic in helping them file the right patents, which often create interest in investors,” says James Nachtwey ’12, an associate at Carr & Ferrell.

          Intellectual property rights can mean the life or death of an enterprise or product. Claude Stern ’80, co-chair of Quinn Emanuel’s IP litigation practice, has made a career of protecting the IP rights of companies, ranging from modest venture-backed startups to leading multinationals.

          And, according to Stern, this was not part of some grand career design: He says he is the “luckiest man” he knows for being at the right place at the right time when he was starting out as a litigator, and IP litigation was not the billion-dollar business it is today.

          In the ’80s, Stern was working for a small San Francisco law firm when a senior partner asked him to handle a copyright case for a venture-backed video game company. The company was worth only $5 million, but it had a prize-winning software program for Macs that allowed users to print greeting cards, calendars, and stationery. A larger and more established company started selling a clone of the same program for PCs. Stern was hired by the startup to file a copyright suit against the bigger company. “I couldn’t even spell the word copyright, and a year later I had my first solo copyright trial, and I won,” Stern says.

          The case, Brøderbund Software v. Unison World, made international headlines as the first copyright case to cover a utility program’s user interface and launched Stern’s career as an IP litigator. “I have the best practice, and being located in Silicon Valley puts me in the center of the IP and technology world,” he says. Stern’s advice for new IP or tech lawyers: “Be on the lookout for the unexpected opportunity to learn and expand your professional horizons. When it appears, exploit it to the max.”

          Vital Players in a New Economy

          Even lawyers like Armin Eberhard ’03, who practice in the traditionally behind-the-scenes area of tax law, say that working for a technology company is nothing like working for companies based on “older” economies. Tax codes and regulations are still playing catch-up with tech companies. “In the older economy, you have products and buildings, and people working in those buildings,” he explains. “With technology, you have intellectual property, and your role as a tax attorney is to help exploit that IP in the most efficient way possible. In most industries, issues relating to tax code and regulations are more settled, but with technology companies, the rules and regulations are constantly changing as the tax code catches up with them.” As a result, tax departments in tech companies are much more integrated in the business operations than in other industries.

          “Most business executives will make decisions and then tell or ask the tax department afterward,” Eberhard says. But not at technology companies. “We are seen as supporting the operational goal of the company,” he adds.

          1L Sean Hanley enrolled at UC Hastings after spending nearly five years as director of compliance at Zynga, maker of the social media game Farmville. The former Silicon Valley executive had been toying with the idea of going to law school for years, but it wasn’t until he started working at Zynga that he realized being a lawyer could be a creative profession. “I was concerned that I wouldn’t find a practice I’d enjoy,” Hanley says. But after working at Zynga, he saw the value of having a law degree and how lawyers are vital team members.

          He says many entrepreneurs have a laserlike focus and passion for their core product but may not be able to prioritize things that help a business grow and thrive. “They would sometimes abdicate a lot of the roles to the business folks, and I found myself advising the company on products, marketing promotions, and putting everything together to make it more effective,” Hanley says.

          Jean Batman ’90 is one of those lawyers who was inspired by her startup clients to quit her partnership at a big firm and found her own firm in San Francisco, Legal Venture Counsel, which caters to entrepreneurs, venture investors, and small businesses. A former entrepreneur herself (she founded a successful brokerage firm after earning her MBA), Batman has represented dozens of entrepreneurs, including high-tech and biotech companies, as well as real estate, financial, and professional firms.

          “What attracted me to this practice is the fact that it is transitory and forces you to be entrepreneurial,” she notes. “No matter how successful you are, you have to continue rebuilding your practice and evolve as fast as your clients evolve. There’s constant change. You have clients that get bought out, do a successful IPO, or fail and start another venture, and their needs change. So you have to be out there networking, marketing yourself, and constantly looking for new business. You never get to a point where you can rest easy, and you are never bored."

          Read more from UC Hastings magazine, The Enterprise Issue, here.

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