Barnes & Thornburg Cloud Computing and Cyber Security Blog

My law firm, Barnes & Thornburg LLP, one of the top 100 largest law firms in the U.S., has just launched its Cloud Computing and Cyber Security blog. The firm also just formed a Cloud Computing and Cyber Security Practice team. The team is composed of lawyers in the firm's various offices, and cuts across many other practice areas, including information technology, intellectual property, business, litigation, insurance coverage and international law.

Roy Hadley and I co-lead the team. Roy is an information security and technology lawyer, and deserves the lion's share of the credit in organizing the new team. Right now, Roy and I are also monitoring and contributing to the blog, although we hope and expect other team members will contribute in the near future.

To access the blog, click here.

Thinking About Cloud Computing and Cyber-Security?

By John L. Watkins

Many businesses are thinking about using cloud computing providers for all or part of their IT infrastructure. Cloud providers promise scalability, off-site IT management, availability and security. As with all new technologies, there are many legal issues.

My law firm, Barnes & Thornburg LLP, has recently established a Cloud Computing and Cyber-Security practice team that cuts across many legal disciplines. My partner, Roy Hadley, and I are the leaders of the new team.

Roy is a true information technology specialist. Roy has practiced for many years in the technology space, including serving as general counsel and chief privacy officer of technology companies. I bring the litigation, insurance coverage, and general business perspective. We have many other members on the team specializing in different disciplines, including intellectual property (which is very strong firm-wide at BT), information technology, insurance coverage and recovery, international law, tax, and general business, among others. The collective experience our colleagues bring to this initiative is pretty amazing. The firm will be launching a blog on cloud computing and cyber-security topics shortly.

Roy and I were recently asked to write a primer on the legal issues for the Georgia State Bar’s Technology Section. Click here to read the article. I hope you find it useful. Caveats: This is a general overview written from a general U.S. point of view. There are additional issues in Europe. As a general statement, Europe seems to be ahead of the U.S. in dealing with these issues.

This One's for Casey, Jr.

By John L. Watkins

Yesterday, Margaret and I lost Casey, Jr., our 21 year old black and white Manx cat. He was a stray in the neighborhood, probably about a year old, when we moved into this house many years ago. He looked a great deal like a black and white Manx cat from our former neighborhood named Casey who liked to "make the rounds" and get fed by many, including us. Thus, we took to calling the new cat "Casey, Jr.," and our old friend became "Casey, Sr." Casey, Jr. seemed destined to be our cat.

Anyway, it took a bit of an effort to adopt Casey, Jr. He was perfectly willing to come on the porch and accept food, but was quite feral, and was not about to let anyone pet him or pick him up. Once I finally coaxed him into the house, an almost instant transformation took place. He decided he really liked regular meals and attention, and became quite the Southern gentleman. He was always dapper -- at least until his last year -- looking like he was wearing a tuxedo. He loved being petted and purred on contact. His favorite spot was on Margaret's lap or sitting beside her on the couch.

It's always difficult to lose a pet, but losing this one was really hard. Twenty or so years is a long time to have a pet. Casey was a link to a different time in our lives, when we were young and things seemed a lot simpler.

Casey enjoyed his life and he had a great heart. You really do not expect an animal to reach such a Methuselah-like age, but he just kept on going. Over five years ago, our vet told us he probably had three to six months to live. The vet was wrong, and Casey still had great years ahead of him. In the past year or so, however, he got old and creaky, and, as old animals tend to do, just could not keep on weight despite having a healthy appetite. Even at the end, Casey's heart and spirit were willing, but the rest had just worn out. We miss him and always will.

If this has touched you, there are two things I would like you to consider doing. First, if you have been thinking about adopting a dog or a cat, do it. And if you are considering a pet, please adopt one from a shelter, or take in that dog or cat your kid brought home. We support Furkids, a no-kill shelter in our part of town. A few weeks ago, we visited its open house. I cannot tell you how many wonderful cats and dogs were there waiting for homes. Trust me, that free "DSH" (domestic short hair) or friendly mutt will make just as good a pet as a purebred.

Second, please consider giving to a shelter in your area. It doesn't matter if it is just a few dollars. Any amount helps. In these lousy economic times, the shelters are really struggling to keep open. If you need a suggestion, the previously mentioned Furkids is a great organization, as is the Atlanta Humane Society.

What About Clients?

By John L. Watkins

One of my favorite legal blogs is What About Clients, written by Dan Hull and others from the Hull, McGuire firm. The key point of the blog is that the focus of what we do as lawyers should always be the client. A great reminder for all of us.

Dan is another guy with Midwestern roots and an international outlook. He "gets it." With great content written in a pithy and entertaining style, the blog is a must read.

Trade Secrets, Green Technology and Protecting What You Think You Own

By John L. Watkins

According to a press release from the FBI last month, green technology is an increasingly attractive target for "would-be information thieves looking to make a fast buck." The Economic Espionage Act is a federal law that makes trade secret theft a federal crime. The language of the Act is very similar to the Uniform Trade Secrets Act, variants of which have been adopted by most states. The state acts provide for civil remedies (damages and injunctions), and sometimes criminal penalties.

Many companies -- large and small -- seek to protect important information as trade secrets. It is often impractical, for example, to maintain a large patent portfolio. The Copyright Act can provide some protection, but is limited in its scope. A trade secret, in contrast, can potentially be almost any information that has economic value and that is subject to reasonable efforts to maintain its secrecy. Examples can include customer lists, supplier lists, business plans, computer programs, formulas, and financial information, all depending on the particular circumstances.

The Need for Protection

A key element for protection under virtually any trade secret law is that the owner took reasonable steps to protect the information. Companies or individuals with trade secrets -- from start-ups to the largest companies -- need to make sure they have acted to maintain the secrecy of their information. This requires legal help, preferably from the beginning.

The vision of recent college graduates (or dropouts) writing software or developing other technology in a storefront office or a garage is a modern variant of the American Dream of rising from rags to riches. Such efforts are not necessarily mere pipe dreams. In fact, modern technology and decreasing barriers to entry probably make it more possible than ever for an entrepreneur to become successful, if not becoming the next billionaire.

This same technology -- thumb drives that hold gigabytes of information and portable hard drives that hold terabytes -- make it easy for anyone with access to the information to copy it. More and more trade secret cases are being brought against former employees who used such technology to take company information.

The start-up is particularly vulnerable. In many instances, friends will work together in developing technology or another invention. Sometimes, entrepreneurs will “partner” with another company for a particular purpose. In some instances, an investor will come into the mix. In each instance, if intellectual property rights are not documented properly, the possibility of a future dispute becomes very real.

Further, the possibility of a future dispute or lawsuit increases in direct proportion to the success of the venture. Put more bluntly, it is not likely that anyone will fight over worthless technology. It is very likely, however, that disputes will develop over valuable technology.

When inventors or entrepreneurs believe they have developed, invented or written something valuable, it is critically important to consult with an experienced attorney. All employees should sign a written non-disclosure agreement. It is also important to enter into a non-disclosure agreement before entering into any relationship with a third-party business “partner” or an investor. It is equally important that persons working together document their respective rights and obligations regarding the technology, writing or invention. (In addition to trade secret protection, it is also important to consider whether to seek additional protection, such as a patent application or copyright registration).

This is definitely not a situation where inventors, entrepreneurs or investors should try to go it alone or use Internet forms. Prospective clients should also not assume that every lawyer has the necessary experience or expertise to prepare proper documentation or to provide the proper advice.

Having proper non-disclosure agreements and other contracts in place is only the beginning. Adopting procedures and practical measures to maintain the secrecy of the information is also very important. This includes limiting access to the information to those who really need to have such access, monitoring usage, and being diligent in reinforcing the need to keep the information secret. Experienced legal counsel can offer practical advice on this subject.

This is an area in which experienced counsel can provide substantial value at a low cost. Management looking to cut a few corners by avoiding legal fees or who think they can go it alone (frankly, a common attitude among entrepreneurs and engineers) often find that failing to invest a little in initial legal advice later leads to costly legal bills, a loss of any protection for their technology, or both.

Trade Secret Litigation

If a company expects that there has been an information breach, it is extremely important to consult immediately with counsel. It may be necessary to engage forensic experts to determine whether there has actually been a breach and the likely extent of the breach. Ideally, forensic experts should be engaged with the assistance of counsel. The failure to act promptly may compromise potential legal and equitable remedies.

Given the FBI's stated interest, it may be tempting to turn the investigation over to the criminal authorities. This should be done only after consultation with company counsel.

First, and most importantly, the authorities are probably not going to be able to secure any direct relief for the company. Damages and injunctive relief will need to be sought directly by the company. Second, involving the government also involves a loss of control. The authorities, not the company, decide whether to proceed and how aggressively to pursue the matter. In contrast, the company can decide how it wishes to pursue possible civil remedies. Third, if the government is to be involved, their involvement is typically best handled through company counsel.

Conclusion

Trade secret statutes provide substantial civil and criminal remedies for the misuse of proprietary information. Not surprisingly, green technology and other cutting edge technology provide attractive targets for those seeking to profit from the work of others. It is critically important to involve counsel as early as possible in protecting confidential and proprietary information. If there is a breach, the early involvement of counsel will help achieve the best possible outcome.

If you do not know how to find a business attorney and need a resource, my book, An Insider's Guide on Hiring a Business Attorney, provides a step-by-step guide for finding, evaluating, hiring, and working with a business attorney. It is available on Amazon.com for $15.99.

Why I Moved to Barnes and Thornburg LLP

By John L. Watkins

This week, Tom Chorey, Tom Gallo and I left Chorey, Taylor & Feil, P.C. to join the Atlanta office of Barnes & Thornburg LLP. Barnes & Thornburg is an Am Law 100 firm with about 540 attorneys with offices in Atlanta, Indianapolis, D.C., Chicago, Minneapolis, Columbus, OH, Wilmington, DE, and other cities.

BT's Atlanta office is quite new. The Managing Partner in Atlanta is Stuart Johnson, a corporate attorney who was formerly a partner at Bryan Cave Powell Goldstein. With our addition, the Atlanta office will have about 20 attorneys in many disciplines.

Many of our friends and colleagues in the legal community will no doubt be surprised by our move to BT. Tom C. and Tom G. undoubtedly have their own reasons, and I will not try to address them, but I can address mine.

After practicing for large law firms (Hansell & Post, then Long Aldridge & Norman/McKenna Long & Aldridge) for over 25 years, I joined the field of "small law" in 2007. I was briefly a shareholder of Wagner, Johnston & Rosenthal, P.C., which is an excellent small firm in Atlanta, and a place where I have many friends. In December 2007, I had the opportunity to join CTF as a shareholder.

CTF truly has exceptional attorneys. Two of these exceptional attorneys are Tom Chorey and Tom Gallo. Tom Chorey is an amazing corporate attorney with tremendous experience, a tremendous work ethic, and incredible compassion for his clients. Tom Gallo is an outstanding litigator, combining great technical skills and experience with common sense. Tom G. is also just an incredibly nice guy.

When it became apparent that CTF, as it had been constituted, was not going to stay together, a priority for me was to keep practicing with Tom C. and Tom G. Although we had a number of excellent alternatives, we chose to come to BT. There are several reasons BT proved very attractive.

First and foremost, BT presents an extremely unique opportunity. I have known about BT for many years, having used the firm as local counsel in a matter a number of years ago. The firm was very impressive in acting as local counsel, and I have always had a great deal of respect for BT as an excellent firm.

In learning more about where BT is today, I became even more impressed. The firm has grown, even through the Great Recession. This appears to be the result of combining great lawyers and great capabilities with a rate structure that conveys value and is consistent with the firm's Midwestern roots.

The firm also has great depth and covers almost every discipline of law. Chorey commented to me the other day, "Do you know the firm has a nanotechnology department?" I replied that I did know that, but that it was very small. Tom did not get the joke right off the bat. Bad joke aside, the fact that the firm covers nanotechnology is extremely relevant, because we have a new client in that industry and having expertise in the area will only help us provide greater value to that client.

The way the firm has gone about building the Atlanta office is also very impressive. The lawyers in the Atlanta office have great resumes and experience. One of the partners the firm just added is Roy Hadley, an excellent corporate attorney who focuses on technology companies, and an old friend and colleague from Long, Aldridge & Norman. The depth and experience of the lawyers in the Atlanta office alone -- which covers some key areas we did not cover at CTF -- should help us serve our clients more efficiently.

Another key factor was that the firm has a nationally recognized insurance recovery practice for business policyholders. BT's insurance coverage practice for policyholders is ranked in the top 10 nationally. A large part of my practice focuses on insurance coverage. Although I have represented insurance companies in the past, my current practice focuses on representing only policyholders. It was thus important for me to find a firm that represented policyholders and not insurers. BT's depth in this area can only help serve business clients with insurance coverage issues.

The final factor, and a very important one, is the ability to focus on practicing law. When I left the large firm world in 2007, the allure of the small firm world was freedom: The ability to practice law the way you want to practice. After over three years in the small firm world, this has proven to be highly overrated, at least for me.

Although the small firm world provides freedom, it also comes with the distractions of trying to run a small business. I will certainly not miss attempting to manage the firm's website, dealing with vendors, trying to do the firm's public relations and marketing with no resources, and the countless other tasks that come with a small law firm. BT has the resources to deal with these issues and to allow me to focus on the two things that I believe are most important: Serving clients and finding new ones.

In December 2009 and January 2010, I wrote An Insider's Guide on Hiring a Business Attorney, a book written for business owners and executives about finding, evaluating, interviewing, hiring, and working with a business attorney. One of the chapters of an Insider's Guide deals with evaluating large firms vs. small and medium-sized firms. I tried to look at the issue objectively, but assumed that, since I had at that time joined the small firm world, I would end up favoring small firms.

That is not how the chapter turned out. In looking at the issue objectively, it was simply undeniable that large firms possess some advantages (generally, excellent attorneys and breadth of coverage). Although excellent small firms also can possess advantages (generally, personal service and a lower rate structure), I concluded that clients generally hire lawyers and not law firms.

In thinking about the large vs. small firm issue, it dawned on me that, if a firm could put together the resources of a large firm with value and personal service, it might be the best of both worlds. In looking at the options, it seemed that BT might just have achieved this happy medium.

It was extremely important for us that BT's rate structure is consistent with the rate structure at CTF. This means that we can continue to serve our clients with all of the resources that BT offers without the need of a large rate increase. I also felt that BT's Midwestern values seem to fit well with our desire to provide our clients with personal service. I grew up mainly in the Midwest, so maybe BT's approach just seemed intuitively right.

There is always a risk in changing firms. In this case, the resources and opportunities offered by BT seem to outweigh the risk of changing. I hope to practice at BT for many years to come.

National Malaise, Unread and Hidden Legislative Mandates, and What to Do About Them

As should be obvious, what follows is a statement of opinion. It is my opinion alone, and is not meant to be (and is probably not) the opinion of my law firm, its shareholders, or other employees.

Maybe it’s just, as one of my favorite legal blogs suggested, the Dog Days of Summer, but I’m not feeling too good about our country right now. As the President heads out for yet another vacation in a G3 paid for by the taxpayers, with the First Dog Bo arriving in another private jet, President Carter’s National Security Adviser tells CNN that he senses a growing “malaise” among various segments of the American people. Certainly, no prior administration knows more about national malaise, so these remarks should be taken seriously.

The cause of my personal malaise is that we are living through an unprecedented encroachment on liberty through the enactment of legislation affecting tens of millions of individuals and huge segments of our economy when our elected officials, not to mention the public, do not even know what is contained in the legislation. The clearest of legislation adopted for the best of reasons can have negative unintended consequences. When stealth legislation with unknown provisions is adopted, unintended consequences (at least unintended by those who did not slip the provisions in the bill) are guaranteed. For many Americans, the stealth legislation and unintended consequences lead to feelings of frustration, anger, disenfranchisement, and an ever growing realization that D.C. has become an elitist Never Never Land. Malaise for many is an understatement.

All of this is compounded by the fact that the vast majority of our legislators seem to lack even the most basic understanding of economics. Politicians, including the President and Vice President, believe that government spending creates jobs. In reality, most jobs are created by small businesses (many of them subchapter S corporations or LLCs). These businesses, and their “rich” owners, are in fact (or at least have been) the backbone of our economy.

Instead of creating clear rules and fair and reasonable taxes on small business owners, which would in turn encourage those businesses to hire and spend on new capital equipment (which would in turn multiply employment through out the economy), small businesses and their advisers are left trying to ascertain the effects of national health care and other legislation that was not even read in its entirety by our elected officials before they voted for it. In fact, only now are our elected officials finding out what they enacted. It all brings to mind the old joke about a politician asked to explain his position on a particular issue: "How do I know what I think until I hear what I say?" Some of the recent revelations (and there are bound to be more) will be discussed below.

Further showing their lack of knowledge (or, if not, their blatant willingness to deceive the public) politicians (mainly Democrats) continue to speak of the “rich”not paying their “fair share” of taxes, when the reality is that almost 50 percent of Americans pay no federal income taxes (although they pay other taxes) and households making $366,400 paid about 73 percent of income taxes. Small business owners already pay a huge portion of the tax burden.

Why does unemployment remain stubbornly high? Why does the economy remain stagnant? Because the only certainty is that taxes are bound to increase in 2011. Although this fact may spur a bit of economic activity in the rest of this year, the scheduled tax increases have caused one notable economist, Arthur Laffer, to predict in the Wall Street Journal that a double dip recession next year is all but inevitable. Why? Because people respond rationally to the economic environment in which they find themselves. Laffer explains it better than I can.

In any event, here are some of the recent revelations regarding the healthcare bill or the “financial stimulus” bill that I bet you (and many legislators) did not know about when they voted the measures into law:

First, a 3.8 percent tax on some personal real estate transactions. This was apparently slipped in one of the last versions of the bill. Predictably, it targets the “rich” (individuals making $200,000 per year or married couples making $250,000). It is true that there are substantial exemptions for the sale of a primary residence, but this tax would hit investment property or vacation homes.

This tax has been the subject of substantial publicity from Republican and right leaning news sources in the past few weeks. Some appear to have exaggerated its application.

Democrat politicians and apologists have responded by pointing out that it applies to relatively few real estate transactions.

Nevertheless, the two key points to me are as follows:

a. Why would anyone support any tax increase on real estate transaction in midst of the worst housing-induced recession in history? This tax increase will only serve to further depress the economy in mountain and seaside communities where vacation homes are popular, and where seasonal residents support the local economy and where people are already hurting, particularly on the Gulf coast.

b. Why was this rather blatant tax increase hidden in the minutiae of the Obamacare bill? If it was such a good idea, why was it not out in the open and subject to public scrutiny before it was enacted into law?

Second, tax reporting on all Purchases of “Goods” Over $600. As reported in the Wall Street Journal, beginning in 2013, businesses will have to report any purchase of goods over $600 from any single vendor, including for such mundane items as office supplies.According to the article, National Taxpayer Advocate Nina Olson, who operates inside the IRS, estimates this provision will “will hit some 30 million sole proprietorships and subchapter S corporations, two million farms and one million charities and other tax-exempt organizations.”

This provision is also reported to apply to the purchase of gold and silver in either coins or bullion. This has caused concerns among coin collectors, in addition to concerns about why the government would be collecting this information.

Again, why was this provision hidden in the bill? Why is it just now coming to light?

Third, an indoor tanning tax. Persons who use indoor tanning salons will be subject to a ten percent tax for each session. This was a legislative hash that was a substitute for the “Botax” (a tax on plastic surgery) that was successfully defeated by lobbying by the medical industry.
This tax has been opposed for the obvious reason that it will probably cost jobs in the tanning business (probably true, see prior link) to implausible claims of racism.

This tax was less under the radar than other hidden tax issues (apparently “tanners” are passionate). Frankly, if someone wants to make themselves look like a tangerine, I find it silly. Nevertheless, one has to wonder which business will be singled out in the next piece of massive social legislation.

Fourth, a mandated obesity calculation for every American. HHS recently issued regulations under the economic stimulus bill that require each American’s BMI (body mass index) to be included on a citizen’s mandated electronic medical record. The electronic records are required to be available on a national exchange – supposedly with adequate security measures – by 2014.

To be accurate, this measure was not hidden in a bill, but was adopted in a regulation. This regulation, however, shows the incredible power that Congress regularly delegates to unelected bureaucrats to adopt regulations that affect all individuals and businesses.

Is the government possessing this information troublesome? To me, it is. First, one has to wonder why the government needs this information. I certainly do not need the government to tell me I need to keep exercising and to lose weight any more than the President needs to be told to stop smoking.

Second, the President just appointed a his former private chef as a “Senior Policy Adviser” (dubbed by one publication as the “Food Czar”). Is the next initiative telling everyone what to eat? It kind of makes one wonder when the President also recently made a recess appointment of Donald Berwick as Administrator of Medicare and Medicaid Services. Berwick is known as an admirer of the British health care system and for his statements that health care rationing is inevitable. Another effort to avoid scrutiny and to fly under the radar.

If all of this bothers you, the next question is what can you do about it? The first step is to vote out of office the politicians responsible for these legislative power grabs. Politicians of both parties are in the ranks, although the Democrats have more than their fair share.

The second step would be to adopt a “single subject” rule. What is a single subject rule? Many state constitutions, including Georgia’s, have a rule that any legislative bill may only have one subject that must be reflected in the title of the bill. Why do so many states have this rule? The short answer is to avoid the excesses we have witnessed at the federal level in hidden taxes, hidden provisions, and earmarks. Single subject rules also help inform the public of what is being considered and, most importantly, force politicians to vote in the open on what they are imposing on the public.

Single subject rules have been criticized as inhibiting the ability to legislate and compromise. This criticism can be easily answered. What a single subject rule prevents is slipping sleazy back room deals, wholly unrelated to the subject at hand, into the fine print of legislation. Further, many would dispute that less legislation is a bad thing. Few would debate, however, that clearly defined legislation, made in the open and subject to input from the public, is good thing.

Single subject rules have also been criticized as often having been observed in the breach by state courts. There may well be truth to this observation, but that is a flaw more in the application of the rule, not in the substance of it.

Of course, a rule would not be necessary if our politicians acted responsibly. That, I fear, is not likely to happen. It is almost comical how, when a party comes into legislative leadership, the speaker or majority leader announces an intention to run the most open and ethical Congress ever. Unfortunately, the words politics, open and ethical often do not go together.

Admittedly, I am looking at these issues from my own political views, which can be summarized as liberal on social issues that do not involve spending, fiscally conservative, and internationally oriented. Nevertheless, anyone should be concerned. Political winds change. During my lifetime, we have had both parties in the White House multiple times, and control of the Senate and the House has also changed both ways.

If you are happy about how things are going now, you should reflect on how you will feel when and if the opposing party rams through a hidden agenda. Regardless of which change you believe in, it ought to be out in the open when our representatives vote on it.