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Tech Companies Swimming In Lawsuits
conq writes "A new survey shows that the tech industry places third after healthcare and energy companies in the number of lawsuits it deals with. It states that an average tech company faces 42 lawsuits currently, more than the insurance industry!" From the article: "An average U.S. technology company currently faces 42 lawsuits vs. 37 lawsuit for an average company. The tech industry places third, after healthcare and energy companies, in the number of lawsuits it deals with ... Needless to say, that's quite expensive. Nearly a third of these companies spend more than 2% of their gross revenue on legal expenses, according to one of the largest surveys of corporate counsel in America."
The firm asked 354 companies in various industries about their top legal concerns.
Which 354 did you ask? There are thousands of tech companies! Define "tech company". Or is this just the 354 you could think of who'd pick up the phone?
That probably has something to do with tech companies having by far the greatest number of in-house attorneys managing litigation - an average of nine per company.
Nine lawyers per tech company - w0w! That's amazing considering that the overwhelming majority of tech companies that I can think of don't even have nine employees. Do you have any idea how many startups there are in California alone? Do six PHDs in a small lab working on, say, the next medical laser breakthrough not count?
Nearly a third of these companies spend more than 2% of their gross revenue on legal expenses
Which companies? What about the other two thirds? Are we supposed to think that 2% is a lot to spend on total legal expenses? What's the distribution?
Olga, your numbers are a crock of shit, and they stinketh. If you're going to give us stats, try starting with something like "of the 100 highest-grossing telecom service companies".
It was explained to me this way when I was researching the cost of medicine in New Zealand versus the USA. "Look mate, we got rid of all the lawyers in the system and can actually afford to provide healthcare to every single one of our citizens as well as many visitors to our country". Perhaps that is a little simplistic, but there is an element of truth to that. I've written before on the number of Ferraris, Lamborghinis, Bentlys and Maybachs! that I've seen in Sarasota, Florida. Apparently, a good number of the class action lawyers for the tobacco settlements live there and in fact, there was one law firm out on the key where I was staying that routinely had the most amazing high dollar automobiles out there. (Ever seen a Mclaren on the street?) That money comes from somewhere.
The reasons for high number of suits in healthcare are somewhat different that that for tech companies lawsuits, which are more dependent upon a broken patent system which allows frivolous patents.
Visit Jonesblog and say hello.
I think that there's a much larger problem then tech companies facing 42.
NOW! we know the question!
My favorite tech company lawsuit being the CEO of Savvis, from which I was laid off from. This news made my Friday. Jerk.
How many lawsuits does a tech company face?
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more software patents. That will solve almost all legal woes with clear cut lines of IP ownership.
http://www.msnbc.msn.com/id/9645594/
Yes, I do realize the source is from M$NBC...
She sued a tech firm after she spilled GTA "Hot Coffee" in her laptop.
More like, some lawyers see an opportunity to beat Apple up for a settlement, so they find one user to be the named plaintiff, and go down the courthouse to get the class registered. Once they get that far, it's generally cheaper to pay them off (a million for the lawyers, and $20-off coupons for everyone else) than it is to litigate.
There's also a very brisk business of suing the officers of any company whose stock falls, as if they're supposed to be able to control the stock market.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
How many of these lawsuits involve "Intellectual Property" (copyright / RIAA subpoenas / patents),spamming or spyware?
Just curious.
I've heard several comments to that effect, over the years.
Certainly does make you wonder how we got from the US Constitution to some of the crap people used it for today.
A feeling of having made the same mistake before: Deja Foobar
Um, is this Microsoft plus 350 other companies averaging 42 lawsuits apiece? Kind of like the average net worth of the people in a bar going to one billion dollars when Bill Gates walks in?
Remain calm! All is well!
The problem is that society is entering the information age, but society has two models of what kind of age that should be. In one model, all information must be controlled like "intellectual ptoperty" and leveraged for unlimited growth and profit. In the other, all information should flow without restrictions, and money should be made from collaberation, services, customisation, and general things that use information to create value.
These are inherently and fundamentally incompatable. An anti-thesis to each other, and while you can't contoroll information with force - you can certainly attempt to bully, threaten, decieve, and sue - and this is exactly what is happening.
So the suits that are happening now, I'm sure are just barely scratching the surface - as companies on the "intellectual property" side start to loose real money, and real market share, and loose out technology wise to the "freedom is free markets" side. You can be sure they will almost certainly freak, and "pull a SCO" across every industry and every sector.
Also, as a note, a parrallel situation is also happening in the financial markets where industries and government are trying to controll and manipulate information on value and money for unlmited growth and profit too. This is about to explode as well.
So watch out, and go offshore if you can, becasue all freakin hell is about to break loose.
And what else might be done with 2%. An small increase in R&D. Perhaps retail prices would magically decrease 2%. Or drug abuse might marginally increase.
If software companies at a number 3, I think this shows how the entire lawsuit thing has been overblow, and how most of the players are two faced. Even the republican party owes the ambulance chasers. It was they that got all the cig money for texas, which allowed Bush to balance the texas budget while cutting taxes, and helped him get elected to the big house. of course he thanked these lawyer by suing them for excessive billing, even though the billing had been agreed to, and they developed these cases with thier own money in the true spirit of entrepenurism, unlike other people we could mention.
The other issue is how many of these are squabbled over IP, and how many are individual get rich quick schemes. I also have no sympathy for the drug companies. Roche is about to make a killing on Tamiflu, probably several billion in the next few years, much of it direct profit from licensing. Will they have to set some of it aside for lawsuit resulting from charges of gauging and the like. Probably. But if they would sell it to certain countries at cut rate, and deduct the good will, they might be able to save the lawyer fees. But they apparently have made the choice.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
My ex wife is a very successful barrister. She's a brilliant, talented woman. Through her I came to know the various subcultures of the legal world. One of the recurring analogies among the lawyers I've known is that they are hired guns. They are the new warrior class.
During WWII a combat soldier, I can't recall his name or rank, noted that among his comrades only a few (~15%) actively engaged in combat and were responsible for most of the damage done to the enemy. Recently on the Discovery channel a U.S. Army Lt.Col. was shown trying to instill a 'killer instinct' in his troops. The show referred to the earlier WWII report that only a few combat soldiers did the actual wounding/killing. The Lt. Col. on the Discovery show said it was like having 85% of librarians illiterate.
Following WWII tribes in New Gunea were introduced to rugby. The tribes took to wearing war gear to the rugby games and rugby substituted for tribal warfare.
Remember the TOS episode where warfare had become virtual and those areas marked as 'hit' had to have it's citizenry report for euthanasia. In real combat losses are not that great in terms of the overall number of combatants. It may be because only a limited number of people are able and willing to kill or be killed. In a world overpopulated with 6 billion the amount of homicidal acts are not that great.
Now with money substitutable for anything, the inclination to combat among individuals and corporate tribes, can be translated into litigation. The amount of litigation might be an index to our willingness to 'kill' oneanother, the more so when money substitutes for one's own blood.
Lawyers are the new esquired warriors. What a horse and armour were to knights and warring lords, a law degree is to the corporate world.
The question arises if, in an evolutionary context, the litiguous 'mortal/capital' combat effects a beneficial path.
One of my favourite authors G. Bateson spoke to... "adversarial systems are notoriously subject to irrelevant determinism. The relative 'strength' of the adversaries is likely to rule the decision regardless of the relative strength of their arguments."
"Academicians are more likely to share each other's toothbrush than each other's nomenclature."
Cohen
Why should there be a lawsuit? Is it Apple's fault you didn't spend the 10 seconds to read an online review of their product before religiously going to the Apple store and buy it?
There are still many competing MP3 players out there, you didn't have to buy the Nano.
Just on the personal level, I'm involved in a small startup venture. We have three people working here, 2 developers, 1 lawyer, and we also retain an outside counsel as well. We're not facing any lawsuits, and hopefully will never face one. When doing contract work, I'd say we spend more of our time dealing with the client's legal department than with the actual technical specification. Its utterly disgusting.
I have no problem believing this.
I run Technical Video Rental, and I've had - literally - dozens of legal threats over the simple fact that I buy DVDs, then rent them out. Despite the fact that this is deeply settled case law, I've gotten everything from a legal cease-and-desist from one firm's CEO (who has a degree from Harvard Law School and was formerly Chief Counsel of the United States Senate Committee on Labor and Human Resources) to a threat to - ahem - anally rape me (from a guy who think's he's anonymous, because he doesn't know what website logs and IP addrs are).
I spend about $2,000 - $3,000 per month on attorney fees trying to explain to people what the First Sale Doctrine is.
This is money that could be spent growing the business, and delivering more interesting videos to my customers...but it gets squandered because so many folks (a) don't understand what the copyright law says; (b) don't understand that exposure increases sales (see also: MP3s and the RIAA).
Bah.
It'd be nice to spend more time doing business, instead of doing meta-business (lawsuits).
42!
When a number say it all. Lawsuits are the final answer!
SeqBox
This is one area where SCO is waaayy ahead of the average... pffft only 42 lawsuits...
Tripe. Compare with countries where court costs for frivolous litigation are routinely awarded to the defendant. Such awards are rare in the U.S., which I believe is one of the main reasons lawsuits are such a popular business model in the U.S. (plus, of course, the astronomical damages still being awarded).
In most jurisdictions (e.g. Canada), it's fairly common that the defendant is awarded legal costs. The instigators of frivolous or exploratory civil suits have to reimburse those they attacked for lawyer and court costs, on top of any damages.
More like sinking in lawsuits, maybe. When innovation is replaced with litigation, What other eventual outcome is to be expected?
What the article fails to mention is that most of these lawsuits are business to business. One of the huge fallacies of the tort reform movement is that most lawsuits come from individuals. It is simply not the case. Most lawsuits against a company are from another company. Most companies have more contacts with other businesses than with individuals. A consumer isn't going to sue your company over the $20 that you screwed him out of. However, another business will sue your ass if you fail to take delivery of $10,000 worth of computer parts that you ordered.
I am not saying that there aren't abusive lawsuits by individuals against businesses. They are just few and far between. Nor am I saying that huge class action lawsuits aren't damaging to corporations. Nor am I downplaying the cost for compliance for numerous industry regulations. But for your average business, the owners have more problems coming from vendors rather than their customers.
So, you want to reduce the costs of business litigation? Pass tough laws against companies that abuse the corporate lawsuit system.