The Limits of Legal Self-Help

Written by Sean Murphy. Posted in 2 Open for Business Stage, Legal Issues, skmurphy

Every bootstrapper has a limited budget for attorney’s fees. Attorneys can help you foresee problems and craft contract language, which looks remarkably similar to English but is in fact code that is executed by the legal system. Use them to protect valuable assets–intellectual property, source code, revenue streams–not create them.

A small digression

If you have no experience whatsoever with software licensing issues this can be very dangerous.

True story: we had one client–briefly in 2007–who had downloaded three contracts from different websites and created a Frankenstein out of the piece parts. The problem was that one of the contracts explicitly specified that their development efforts on the software product were “work for hire” which meant that they had transferred ownership of their technology to their first client.

The client was alas somewhat unscrupulous and happily signed the contract very quickly and with a minimum of negotiation. They felt great…for a while.

They engaged us to help them find more customers and as a part of our due diligence (and in assisting ongoing negotiations with their original client) we discovered that they had a serious problem and that their first client intended to wring maximum advantage from the contract. We helped them find a startup friendly attorney but the business negotiations with the original client ultimately foreclosed a market segment for that client’s exclusive use of the technology in exchange for giving them ownership back of their technology.

This was an “own goal” that some first time entrepreneurs are at risk for:  contracts may look like they are in English but they are not. You should at least take your English language “meeting of the minds” deal points and pay an attorney for an hour or two to review the basics. If you have a first customer, a clear scope of work or datasheet for the product, agreement on value/price, you should be able to find an attorney that would be willing to defer an hour or two of time to help prevent basic mistakes.

We routinely recommend that bootstrappers talk to Robert Dang or Joey Tran at FortisGC in Redwood Shores or George Grellas in Cupertino. All three have experience helping bootstrapping startups, are highly knowledgeable, and a pleasure to work with.

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