21 June 2005

Legal Lines in the Sand

The Wired GC posted late last week concerning the crumbling patent infringement settlement between Research in Motion (RIM), maker of the BlackBerry messaging devices, and NTP. For those not actively following this case, the dispute concerns several patents assigned to NTP, which RIM may have infringed with various models of its BlackBerry devices. Faced with the possibility that all its BlackBerry sales in the United States could be brought to a halt by an injunction in the case, RIM settled with NTP in mid-March. That settlement was memorialized in a half-page term sheet thrown together and signed by the parties, a document which NTP now argues is "vague" and "ambiguously worded". RIM, it seems, may be back in jeopardy.

As The Wired GC pointed out:
Corporate counsel get criticized for over-lawyering and endlessly documenting. But sometimes it’s because issues are complicated and the general intent–to pay money to settle claims–has to cover all contingencies. That’s precisely when a highly competent and creative lawyer is worth every penny–maybe even worth a percentage.

Speaking generally now, it can be tempting to take the quick-and-dirty approach to documentation after protracted settlement discussions or contract negotiations. There are flights to catch and a backlog of other pressing business to attend to. Any “term sheet” or the eerily-titled “letter of intent” relies on one thing: the mutual trust of the parties. There are cases where they are enforced (like the Texaco v. Pennzoil case), and others (maybe this one) where they aren’t.

One of more difficult adjustments lawyers must make when they move to an in-house position is to internalize the fact that their legal work is no longer the primary product of their employer. Meticulously-researched, expertly-drafted legal documents are no longer the objective of your organization -- indeed, such documents may be an unnecessary impediment to your company's business objectives. As I was told once at the first company where I worked in-house, "This is great, but we're not selling your contracts."

More so than outside counsel, in-house attorneys must learn to strike appropriate balances between a company's business objectives and its legal interests. The corporate counsel's rule of thumb is to do just enough legal work to protect your employer. An airtight contract which absolves your company from every liability will never be signed by the other party and your company will, as a result, realize nothing of value from the transaction.

Notwithstanding, there are some situations where the company's legal interests are of paramount importance -- as, for instance, in the settlement of multimillion dollar could-break-the-company patent litigation -- where an in-house attorney must draw the proverbial line in the sand and take the time to draft (or overdraft, as the case may be) despite the protests of the non-lawyers around him. An attorney who lacks the professional courage to draw that line when necessary, or who has lost his credibility for drawing lines without good cause in the past, has become a liability to his company who should be removed, gracefully or otherwise, without delay.

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