When Should My Startup Get a Litigator Involved?
Everyone knows that if your company is being sued (or wants to sue somebody else), then they need the assistance of a qualified litigator. But there are several other important points in the life of a startup where a visit to your friendly neighborhood litigator is an excellent idea, and can help your company avoid unnecessary legal headaches down the road. This is especially helpful when the litigator works hand-in-glove with your corporate and transactional counsel to predict and prevent problems, including at the following six key events in your business:
1. Contract/Deal Formation: Are your service providers, vendors, or business partners asking for special terms, exclusivity deals, or most-favored-nation clauses? Should your contracts include an arbitration clause and, if so, on what terms? Experienced litigators have seen a thousand ways that a contract can go wrong, and business-savvy litigators can quickly shape contract language to prevent problems without slowing down the deal.
2. Protect Your Intellectual Property: What steps have you taken to protect the confidentiality of your company’s intellectual property, and are those steps sufficient under the law to preserve trade secret protection? Does your company have non-disclosure agreements with all necessary employees? Do you provide goods or services to any government entity that is subject to public disclosure (FOIA) laws? Your intellectual property rights may be your most valuable assets. Protecting them requires special attention, and a litigator experienced in trade secret and intellectual property law will know how you can lose rights to these assets and how to prevent that from happening.
3. Disgruntled Employees: An openly disgruntled employee is a recipe for future problems, including potential whistleblower suits, disclosure of confidential information to competitors, and claims of discrimination or harassment. For startups, unhappy founders and shareholders can also cause difficult problems. Get a litigator involved early to educate you about possible risks, how best to minimize those risks, and how to solve molehills before they become mountains.
4. Compliance Baby Steps: What are the top five compliance risks that face your business (e.g., loss of intellectual property, employee theft, compliance with state and federal regulations, EEOC, OSHA, FCPA, etc.)? Small companies and startups don’t need nearly the same compliance structure as a Fortune 500 corporation, but as companies grow they need to conduct periodic risk assessments concerning their business and implement appropriate compliance programs to both prevent problems and minimize harm from inevitable bumps in the road. A litigator can help identify the potential legal risks and shape compliance and ethics plans to minimize potential harm.
5. Tracking Legal Trends Affecting Your Business: Have you noticed one (or more) of the companies in your industry has been sued in substantial litigation? Have government regulators targeted your industry as a focus of an enforcement effort? Litigation tends to come in waves, whether for options backdating, patent disputes, or class action consumer protection cases. As startup companies mature, litigation risk increases. If you see a case that may affect your industry or company, or just want to get a sense of where the legal winds are blowing, get a litigator to analyze how current trends might impact you and what you can do avoid becoming a statistic.
6. Sale/Merger/Public Offering: You probably already know that a sale, merger, or public offering of your company poses a variety of legal challenges. But a litigator can provide soup-to-nuts insight on what litigation is most likely to arise (strike suits, valuation litigation, etc.) and position your company for the most efficient and successful result possible if your company is sued.
Litigators are not just for when things go wrong – they can also be a powerful tool to identify and prevent problems before they occur. So reach out to your favorite litigator and find out what you’re missing.