The Next New--Potentially Illegal--Thing

Tweet

In the very early stages of innovation, little thought is likely given to regulatory obstacles or potential litigation. For applications such as Napster and YouTube, however, which are going to host user-provided content, a smart entrepreneur can probably anticipate legal problems. Even if the developers intend for users to work solely with their original content, users will have other ideas. In the end Napster tried hard to work out deals with the music industry, but ultimately litigation shut them down. YouTube found a deep-pocket buyer in Google, and also a company with considerable clout in the content business. So despite a pending $1 billion lawsuit by Viacom, the company has been doing deals even as it tries to reign in users' most egregious behavior.

In the gaming world, the very inventive PlayStation 3 game Little Big Planet is a sandbox in which users can create their own game levels and share them with others over the network. The game itself doesn't use third-party content, but some of the user-created levels are filled with homages to favorite movies, TV shows and other protected intellectual property. That content is a hornet's nest of copyright and trademark violations. Content owners these days seem to keep fans on a pretty short leash. The user forums are already buzzing about levels being deleted, presumably because Sony has either been threatened with or wants to avoid lawsuits.

If you want to launch a company or product you believe will attract litigation, what is the best way to go about it?

If you think you're building something that's going to attract lawsuits, for goodness sakes get good outside legal counsel. I don't know how many times I talk to executives at start-ups (and, to be fair, corporations also) who think they know the rules and how to stay inside them. "As long as we don't encourage or help the users, we can't be sued for what they do." Or, "as long as they don't copy more than 15 percent of the song, it's a fair use." Or, "We're pretty sure no one has a patent on any of this already." In some cases, under some circumstances, that may be true. In many others, it isn't.

Law, especially business law, is often not intuitive or obvious. A little knowledge can be dangerous. And having the winning argument in a lawsuit doesn't help if you can't afford to pursue it as far as your adversary. Many law firms, particularly here in Silicon Valley, specialize not only in working with start-ups but also in these particular problems. You need a lawyer who understands both your business and the field of law you're wading into.

Companies test physical products in labs or in the field, or they bring in experts to make sure their offerings do no harm. Is there or should there be a virtual version of that kind of tire-kicking to avoid liability?

No matter how sophisticated they are, scenario-planning models can't account for all the variables in the legal system. Modern business law is remarkably complex, even when you're just talking about one country. Global aspects put you off the complexity charts. A good lawyer can certainly help identify many issues you're likely to run into, but you've got to be prepared for surprises.

When major retailers and consumer products manufacturers, including Procter & Gamble, Gillette, and Wal-Mart, began preliminary tests of new Radio Frequency Identification (RFID) tags to replace the current static UPC codes, how could they possibly have predicted that religious groups would view the technology as a harbinger of the Apocalypse? (A group called CASPIAN believes the RFID tags are the mark of the beast prophesized in the Book of Revelations.) I don't fault them for being caught off-guard on that one. But I do think every innovator should get ahead of its critics and start their public education as soon as possible to promote the benefits of new technologies.

Technology is moving from business applications to personal applications, and that's exciting. It's also more likely to scare people who don't understand it. The RFID industry has been in a defensive posture from the beginning. Some states have passed, or at least considered, anti-RFID laws even before the technology has been deployed. The innovators have failed to make the case to consumers about how this technology will revolutionize the supply chain and how that, in turn, benefits consumers. No matter how great the potential is for your innovation, you won't get far if it's banned before you have a chance even to test it.

 PREV  1 | 2 

Read more:

Leigh Buchanan

Leigh Buchanan is an editor at large for Inc. Magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture, and she contributes Inc.'s capsule book reviews, "A Skimmer's Guide to the Latest Business Books."

Sign-up for our Small Business Success Newsletter

Email Address: