The Limits of Legal Self-Help

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

If you have limited experience with business contracts or software licensing issues, legal self-help approaches can be very dangerous.

True story: We briefly had a client 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 part of our due diligence in assisting with ongoing negotiations with their original client,  we discovered that they had a serious problem. 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” risk some first-time entrepreneurs face: contracts may look like they are in English, but they are not. You should at least take your plain English “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, and an agreement on value/price, you should be able to find an attorney willing to defer an hour or two of billing until you get paid to help prevent basic mistakes.