Martindale-Hubbell`s Counsel to Counsel—Changing Role of Legal Counsel When Launching New Technologies

01.01.02
By Timothy B. Corcoran
Published in The Corporate Counsellor

This round table discussion was moderated by Deborah McMurray.

Corporate law departments assume responsibility for a wide range of matters to protect their company, but perhaps none of the aspects of the job is as demanding as overseeing the launch of new technologies. There are often high-stakes decisions to be made about intellectual property ownership, product development oversight and regulatory compliance requirements.

Martindale-Hubbell`s Counsel to Counsel series came to Atlanta recently for a wide-ranging discussion regarding how the role of legal counsel changes when it comes to the launching of new technologies and services. This forum was attended by senior corporate counsel from a number of Fortune 500 companies throughout the Southeast and was co-hosted by the law firms of Womble Carlyle Sandridge & Rice and Sutherland Asbill & Brennan.

The exchange was candid and drew from the interaction of participants who work at companies in industries as diverse as telecommunications and manufacturing--including representatives from Aetna, BellSouth, Cox Interactive Media and Volvo Commercial Finance. There were a number of interesting findings from the forum, but perhaps the most intriguing observations focused on the way in-house counsel are handling their changing role when it comes to alliance management for purposes of launching new technologies and services.

The associate general counsel at BellSouth discussed how his company is pursuing more technology alliances and product/service bundling arrangements, rather than acquisitions or even joint ventures with other organizations. The general counsel at Cox Interactive Media observed that these sorts of "marketing alliances" historically had shelf lives of three to five years, but now are running at terms of just 12 months with 30-day exit clauses.

This is a significant change in the formality of corporate relationships, but in-house counsel should be careful to still apply structure to the legal process. For example, BellSouth applies M&A guidelines—including template agreements and checklists for deal negotiations--to their internal work flow. This includes the posting of various documents on the company`s intranet for all of the in-house and outside lawyers to access at any time.

The forum participants also engaged in a discussion about some of the complexities associated with marketing alliances when it comes to introducing new technologies. One of the challenging issues addressed was that of intellectual property considerations. In an acquisition, there are typically representations and warranties made and in a joint venture, the IP is owned by the joint venture itself; but if something new is created via an informal marketing alliance, who owns that intellectual property?

Another challenge involves questions about customer service. Unlike more structured agreements between two entities, it can sometimes be unclear as to which organization is ultimately liable for managing the actual customer relationship. For starters, who owns the customer list? Who owns the derivative works that are produced by the alliance and delivered to the customers? How does a company measure customer satisfaction in an informal alliance, and who is responsible for the problem when something goes wrong? Also, as a partner from Sutherland Asbill & Brennan posited, what transition plans are put in place for customers who are stuck with dying products because one of the alliance partners went out of business?

To this last point, one of the general counsel in the forum pointed out that there has been more focus lately on whether a company can take over the new technology produced by an alliance if that company`s marketing partner closes its doors. This becomes especially important in some alliances where source code or key employees on the other side are crucial to the survival of the new technology offering.

This led to an important conversation about the ugly reality for lawyers charged with negotiating agreements: the exit strategy. One general counsel at the session plainly stated that his company will simply not enter into an informal marketing alliance for launching new services unless there is a specific exit strategy in place--and he looks to his business management team to help develop that strategy. A law firm partner from Womble Carlyle added that the creation of the exit strategy in a marketing alliance is particularly challenging because it sometimes requires outside lawyers to make the recommendation that an agreement just isn`t going to work and that the company must get out while it can.

The job of the general counsel is to anticipate all kinds of disputes and position his/her company in a way that is legally favorable. To illustrate the point, one of the law firm representatives at the forum noted that there has been significant focus lately on "unwinding" strategic alliances and that much of the current litigation in this area revolves around arguments over what went wrong and who should be held responsible.

By being aware of the potential disputes when strategic alliances are created for launching new technologies, and taking pro-active steps in advance, legal counsel from both inside and outside the company can provide valuable guidance that has a direct impact on the company`s bottom line.

Timothy B. Corcoran, Senior Director of Sales and Operations at Martindale-Hubbell, can be reached at 908. 508.7688.

Deborah McMurray is a strategic marketing consultant to the legal industry. She can be reached at 214.351.9690 or mcmurray@contentpilot.net.

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