Bottom Line Business Insights : Maryland Business Lawyer & Attorney : Wagonheim Law Firm : Mergers & Acquisitions & Contractual Negotiation

I was straining to hear the other parties to the conference call as the two sides debated a sensitive issue with significant ramifications. The matter at hand was a large corporate sale spanning several states, two separate buyers under family control, and one seriously ticked off lender. 

The professionals on the phone – meaning the lawyers, accountants, and one person with the vague title of “consultant” – knew that the deal was about to blow up.  And that’s when my client chimed in with something just this side of insane. There was a long pause during which all we could hear was breathing and a muffled cough.  And then the buyer began to talk.

My first thought as I listened to the buyer stammer through a response was “dear God, they’re actually considering this.” Thirty days later, the completely unreasonable point raised by my client during that conference call became part of the deal with only minor variations. 

I’ve reflected a great deal on that conference call. The experience was not singular in my career as I’ve had other moments like it. But this one really resonated, perhaps due to the stakes involved.  We had spent months and significant dollars negotiating this deal and everyone seemed at the end of their proverbial rope. One more jostle, it seemed, and the deal would unravel. Well, my client not only jostled the arrangement, he put his entire weight on it and jumped. In the end, he got precisely what he wanted.

In sports, we often hear that the winner is the one who “wants it more.” I have always found it hard to believe that there was a locker room in which the desire to win was markedly lower than was present in room across the hall. But here’s what I’ve learned in business: the winner is frequently the one who wants it less. My client had the other side convinced that he could walk away at any time – that he was slightly more than ambivalent about the deal and that he could take it or leave it.  The other side wanted it…and my client dared them to prove it. By closing on my client’s terms, that’s just what they did. 

In my experience, too many business owners, even (especially?) those who pride themselves on their negotiation skills, sustain the other side’s objections. They take a look at possible terms and remove them before the other side’s review because there might be an objection. Now, I’m not suggesting that every document be drawn up to reflect the hardest possible line, but I am proposing that you “pay yourself first.” Take a good hard look at the things you want to get out of the agreement and beyond. Then ask for them. 

Sure, you may have to back off a few key demands, but time and time again I have seen my grandmother’s wisdom pay off: “If you don’t ask, you don’t get.” And if you do ask…well…sometimes you’d be surprised.

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The American people, we are told, want their government to be more transparent. Whether or not that’s actually true, one thing is for sure: when the subject is business, rather than government, we strongly prefer old-fashioned secrecy. Customer lists, patents, processes, tools, pricing, marketing strategies, product formulae, prospects…you name it. We, as business owners and managers, want the outside world kept in the dark.

As counsel, I tend to come in when this desire for secrecy has already been frustrated – when the proverbial cat has been let out of the bag; that’s when business owners look for the responsible parties and a way to lay blame and collect damages. 

Maryland, like most states and the Federal government, affords companies protection against the misappropriation of trade secrets. In addition to remedies which may arise out of contractual relationships, the Maryland Uniform Trade Secrets Act (“MUTSA”)[1] provides a strong remedy for misappropriation of a trade secret. MUTSA defines a trade secret as:

“Information, including a formula, pattern, compilation, program, device, method, technique or process that:

a)      Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

b)      Is the subject of efforts that are reasonable under the circumstances to maintain secrecy.”

It is this final section that insurmountable hurdle for many companies looking to go to war over what they see as the wrongful taking of their trade secrets. Imagine a judge looking down at you from the bench and asking two related questions – one rhetorical, one not:

1. What steps did you take to safeguard what you now claim to be trade secrets?
2. If you didn’t treat this information like a secret, why should I?

Full disclosure: I am one of those small business owners who drive IT people nuts. I hate changing passwords, I fight the inconvenience that comes along with IT security, and I bristle every time NetGear blocks my access to my fantasy football site of choice as “inappropriate or tasteless.” (I’m guessing because of the “fantasy” tag.) The lawyer in me recognizes, however, that, even from a legal perspective, our IT guy has a point. If I don’t take even the most minimal safety precautions by restricting access to what I deem to be sensitive material, what right do I have to ask the court to rectify my error after the horse and the barn have separated? 

Stop for a minute and think about the information your company holds dear. That information may already be the subject of Confidentiality Agreements or other restrictive covenants. The sensitivity of that information may be emphasized in company memos and personnel manuals. But regardless of what it is – customer lists, pricing structure, marketing strategy, or anything in between, honestly answer my hypothetical judge’s questions. (And if you need help figuring out what I mean by an honest answer, you may want to check out Don’t Lie to the Dog.) 

Your challenge, of course, comes after you self-grade your two-question test. If you fail, what are you going to do about it?

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"Our lives begin to end the day we become silent about things that matter.”

-- Dr. Martin Luther King, Jr.

Yesterday, on the federal holiday that is Martin Luther King Jr.’s birthday, I went to work. And, truth to tell, I was too consumed with client concerns and various front-burner issues to give much thought to Dr. King during the day. Last night, however, I found myself in a dinner table discussion arising from my youngest son’s inquiry about; (i) why the schools were closed; and (ii) what the Google doodle for the day meant. 

For those of you who may have missed it, the Google doodle highlighted Dr. King’s “content of their character” quote. In our discussion, however, I found that that expression did not resonate with my children as much as some of his others. Perhaps so because it is expressed in the passive voice – “they will be judged” – rather than in an active voice which would make the listener the thought’s protagonist. In either case, the quote at the outset of this entry made our conversation much more concrete. It was here that the conversation turned from what they (the people who judge others by color) should do to what we should do if we witness a wrong that matters.

Last year, I recorded a video centered on the idea that “you teach what you tolerate.” My focus, then as now, was on business practices. Now I know that Dr. King’s message was crafted to raise the consciousness of a nation, rather than the productivity of a workplace, but the same truth applies. As business principals and managers, our businesses begin to decline the day we become silent about things that matter. 

In the Republican debate last night, Newt Gingrich and Rick Santorum once again directed their fire at frontrunner Mitt Romney over his tenure at Bain Capital. It was fascinating theater, made even more so by the backdrop of the seeming Party of business frantically trying behind the scenes to get the candidates to tone down the attacks on the free enterprise system. The controversy begs the question: Is there an inherent conflict between the ideal unbridled self-interest that is the capitalist system and the universal truth that turning a blind eye to things (including things other than money) causes ourselves and our companies to diminish? 

I don’t think so. I believe that adherence to core values is, in and of itself, good business. I would submit that, in business, what causes most companies to begin to die is not a conscious decision to turn away from core values, but rather a reluctance to take action when witnessing transgressions or problems that matter. From the seemingly trivial (dress code) to the indisputably significant (price gouging, customer disservice, and policy indifference), we as business owners teach what we tolerate. 

In the running of a company, just as in the redemption of a nation, silence is fatal in the face of things that matter.

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When I said the words “it’s time to have an adult conversation about money,” anyone overhearing might be forgiven for thinking I was talking to my 12 year old son. I wasn’t. I was looking in the mirror.

Toward the end of last year, I gave out bonuses to my employees. I do this every year and there was no doubt that they were well earned. Some people thanked me; some did not. Regardless, in what has become an unwelcome annual tradition following the delivery of the bonus checks, I found myself wondering.

“What did they think?”

“Were they pleased?”

“Were they disappointed?”

“Did they walk away thinking they were happy to be working for me or do they think I’m some kind of skinflint?”

I value each and every employee. There is no such thing as indentured servitude and, as people of talent and accomplishment, everyone who works here has options in the marketplace. I want to keep them happy. Of course, I also want to run a non-cash-strapped, profitable business.

That’s when it occurred to me: It’s time to sit each of my employees down and have an adult conversation about money. It’s time (or long past it) to talk to them individually about their wants, constraints, and expectations … and mine as well. After all, we share a common interest, they and I: we want this firm and everyone associated with it to prosper. 

That’s my task between this week and next – to sit down with each person and talk to them about raises and bonuses, profits, losses, and projections. If we each approach it the way I think and hope we will, for the first time I won’t have to wonder if we’re on the same page; I’ll know it.

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I remember helping my father install his law firm’s first IBM PC in 1985. He was ecstatic. He felt that the kind of personal technology represented by the computer would enable solo practitioners like him to match the production of firms many times their size.  

The rise of the individual, giving power to the lone voice, seems to be the common thread running through our technological and social advances. The internet, the proliferation of blogs and consumer review sites, and the advent of social media have elevated individual branding to an art form. 

Today, companies are struggling to catch the social media train many are convinced has already left the station. Many business owners feel that they have somehow failed unless they have thousands of Facebook “likes,” Twitter followers, and LinkedIn connections. So they encourage their workforce to blog, tweet, post, and connect. After all, many of the social media sites are designed around the individual, rather than the company. They are created with an eye toward building the personal, rather than corporate brand.

But how does that square with a shifting workforce?

Kevin O’Keefe recently wrote a blog post for attorneys entitled “Who owns the Twitter followers at your law firm?” In his posting, he recounted the now-pending case of a new your company, Phonedog.com which filed suit against a former employee seeking ownership of his Twitter account and its 17,000 plus followers. The Complaint alleges that the employee, Noah Kravitz, opened the account while employed by Phonedog under the name Phonedog_Noah. When he left, he took his account with him.

While this case has yet to wind its way through the courts, the question it raises is absolutely crucial to the determination of social media strategy as well as to the formation of employee-employer relations. Many employment contracts have provisions stating that anything the employee creates while employed – all intellectual property in other words – belongs to the employer. Few contracts, however, address social media. 

As you review your employment agreements and social media strategy for 2012, remember that they are not separate entities. They overlap. As technology advances, so does the power of the individual to help or hurt your company’s brand. Just as many companies place a priority on keeping employees’ cell phone numbers after they leave so that they can catch calls from company accounts, business owners should also keep social media followings in mind when planning beyond the tenure of any given employee.

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