Posts from Law

I've been on a mission to dramatically reduce the legal costs of a venture financing. Our firm is doing our part. On many of our recent transactions, we've gone without counsel and have signed documents without negotiation. That takes out the investor counsel costs. And we've been pushing company counsel to reduce their costs. But we are still seeing company counsel costs of $15k or more on venture financings even with our "no negotiation" approach. I'd like to see venture financing legal fees get to $5k or less. I don't know why raising a venture round can't be like signing a lease on an apartment with standardized docs and a one page rider for any changes.

As we dig into the costs on the company counsel side, there are areas we feel can be improved and areas that cannot. The entrepreneur still needs an experienced counsel to explain the deal to them. That time and money is valuable to everyone involved. I'm hopeful that Brad and Jason's upcoming book will help reduce the time and money spent educating entrpreneurs on venture financings, but realisitcally the company counsel is still going to have to do some hand holding.

But there are many areas where the company counsel is spending time and money doing things that can and should be automated. Tops on that list is document creation, distribution, change management, and ultimately signing.

We've noticed that some of the new online funding platforms, like Profounder, have managed to totally automate this process online. We wonder why the law firms we work with have not. One of the best hacks of the Disrupt Hackathon last weekend was Docracy. I am going to find out if we can use Docracy on our next venture financing to make things more efficient.

And Bijan posted recently that he is using an iPhone app called EasySign to sign legal documents when he is out and about. After going through torture this weekend at our beach house to sign docs that absolutely had to be signed by yesterday, I'm searching for something similar on my Android. Please EasySign team get me an Android version. I promise I will blog about it when you do.

And in the meantime, if anyone knows of any good mobile signing apps on Android, let me know about them in the comments.

This whole area is so ripe for change. We are documenting financings for cutting edge web startups using technology from the middle ages. That must change and it must change now.

Yesterday, Judge Louis Stanton of the Southern District Court here in NYC issued his opinion in the long standing legal battle between YouTube and Viacom. It was the very threat of copyright litigation that forced YouTube to sell to Google, who had the resources to fight this fight.

This decision means that other user generated content services will not have to make the choice that YouTube had to make. Judge Stanton ruled that YouTube was operating within the framework of the Digital Millennium Copyright Act (DMCA) which says that web services that have infringing material in them must respond to take down notices but do not have to proactively weed out their services of all infringing material.

This is a huge victory for entrepreneurs and the web. I am ecstatic.

My partner Brad Burnham wrote a post today explaining why he disagrees with Nathan Myhrvold's recent Harvard Business Review piece in defense his patent holding company,Intellectual Ventures.

In the post, Brad talks about the power of "permissionless innovation" and says:

The real reason the independent software industry emerged is that operating systems and APIs made it possible for independent software vendors to develop applications independently. They no longer had to ask permission of the hardware vendors. This same characteristic of permissionless innovation led to the explosion of independently created services on the internet. The rampant abuse of the patent system has created the opposite condition for the creators of software and web services today.

Brad ends the post with the following observation:

We have all benefited from the extraordinary innovation delivered first by the independent software industry and more recently by the web services industry. In both cases, this innovation was a direct result of the ability to innovate without permission. Nathan proposes to replace this world of decentralized innovation on open platforms with one dominated by a new gatekeeper, "intellectual property market makers". In this world, young companies, may not need to ask permission of Dell, Microsoft, or Verizon, before they launch a new web service, but they will have to negotiate with Nathan's firm to as he puts it "get all the patents they need to roll out an innovative product faster and at the same time reduce the risk that they'll miss a necessary license and get blindsided by an infringement suit"

I agree 100% with Brad that software and business method patents are a major inhibitor of innovation. If you'd like to engage in a discussion this topic, I'd encourage you to do so on Brad's post on the USV blog.

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• Turning Patents Into 'Invention Capital' (nytimes.com)
• Nathan Myhrvold's Intellectual Ventures Using Over 1,000 Shell Companies To Hide Patent Shakedown (techdirt.com)
• Patents Are A Weak Measure Of Innovation Activity (feld.com)