Originally published on May 8, 2018 in Forbes Technology Council here.
As the technology industry booms, so do the legal battles that surround, shape and support it.
In the first quarter of 2018, half of the top 10 global companies, ranked by their highest market cap, were rooted in tech, with many of Keystone’s clients like Apple, Amazon, Google and Microsoft reigning over traditional conglomerates and retail giants. With that progress has come a surge in high-stakes, high-profile litigation.
Several major cases have grabbed the spotlight in recent years — from the European Union’s antitrust charges against Microsoft and Google to the $1 billion smartphone patent dispute between Apple and Samsung to Amazon’s billion-dollar transfer-pricing conflict with the IRS to another one of Keystone’s clients — Uber’s $245-million trade secret settlement with Waymo. As these cases bring widespread scrutiny to the technology sector, they present critical business challenges. Here are some factors to consider when navigating this growing intersection of technology and the law.
1. Tech Lawsuits Are Complex
Legal disputes involving the technology industry are complex. First, the underlying technology at issue in the lawsuits can be difficult to understand. Because of the fierce competition in emerging technology platforms, the real differentiation in the platforms may come down to a very low-level technology feature (e.g., a particular algorithm for optimizing a process embodied in source code) or abstract concepts embodied in the form of trade secrets. This is further complicated by the fact that the underlying technology may actually be evolving during the course of the dispute. As a result, the ligation and pre-litigation arguments involving patents, valuation, competition or even tax need quick resolutions.
Second, when it comes to technology disputes, legal precedent may have been originally designed for traditional businesses. However, with the emergence of new business models, creativity may need to be applied to existing laws to work for these new types of companies. With the explosion of the ride-share industry, Uber and Lyft have been hit with several suits based on outdated laws that were designed for taxis. These have slowed down the companies’ growth and slowed expansion plans.
2. Make Legal Matters Part Of Your Business Strategy
Approaching legal matters as a part of your broader business strategy is vital because the decisions made in these cases can directly impact your product and services. It can also impact your competitor(s) and the broader ecosystem in which you compete. As the fair use settlement in 2015 in favor of Google Books showed, these cases can have wide-reaching precedents that go well beyond the tech industry.
Legal battles may stall innovation. Take the case of Vlingo, a voice recognition company on the verge of partnering with Apple, Google and other technology giants in 2008 before it was hit by a patent infringement suit by a competitor called Nuance. Funds originally earmarked for research and development were unexpectedly diverted to court fees. While Vlingo triumphed in the trial, the financial setback forced its eventual sale to its competitor.
Many of the lawsuits bubbling up in the tech sector that may relate to licensing, infrastructure projects, collaborations, outsourcing agreements, breach of data or media rights can cause significant rifts in your established business model and impact the direction your company takes moving forward.
Both Apple and Qualcomm are suffering as a result of their longstanding legal battles. With the most prominent dispute hinging on basic mobile-phone performance, Apple is at risk of falling behind its competitors in connectivity technology while the chipmaker could take a huge hit to its revenue as it faces losing one of its biggest customers. The two companies that should be growing their businesses together instead are suffocating each other with a long list of lawsuits that have kept them focused on mediation.
When your company is not well prepared to deal with potential legal issues, the consequences can be costly and sometimes impossible to overcome. It’s crucial to build a business plan that recognizes risk and potential conflict, allowing your team to minimize the impact of these setbacks.
3. Call On The Experts
While many judges or juries may lack the expertise to parse the details in highly technical cases, what I have seen time and again is that having experts on your side is advantageous.
In the court battle between Apple and Samsung over smartphone patents, the experts on each side guided the decision makers to a thorough understanding of the technology assets involved and related them to real-life business scenarios. They also offered ways to measure and assign a value to the complex technical assets at the center of the dispute. A major point of contention during the trial was that Samsung’s expert witnesses argued Apple’s patents were worth around $38 million, while Apple asked for $2.2 billion in damages. The outcome is pending a retrial.
With the right people in your corner, it’s possible for them to understand, measure and value complex technology, provide benchmarks and most importantly, make complex concepts relatable to judges and jurors (e.g., through visual aids or analogies) who may have the power to decide the fate of your company.
As in nearly all cases, third-party opinions lend unmatched credibility to your argument. Industry veterans, academics and consulting companies can provide invaluable expertise when it comes to technology-related legal matters. Not only that, but they can provide experience across all phases of litigation, from early exploration and in-depth analysis through depositions and trial testimony.
There is a lot at stake here. It pays to invest in people with exceptional problem solving and analytical skills to help you navigate the challenges.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Rohit Chatterjee has 10+ years of work in strategy, operations, product development, innovation, technical & economic consulting across myriad industries.