Professor Orozco accepts compliance work publication offer from U. Penn. J. Of Business Law

My manuscript titled A Systems Theory of Compliance Law was accepted for publication over the weekend from the stellar folks at U. Penn. So many of my respected colleagues in Legal Studies at Business schools have published in this premier law review. I briefly considered expediting to other law reviews but reconsidered when the Editor-in-Chief of this journal left me a voice mail and mentioned that he was a fellow FSU Seminole (College of Business alum no less!).

I look forward to publishing more works in the interesting field of corporate compliance.

Best,

-Prof. Orozco

Law firms to train lawyers in business

Large New York law firm Weil will partner with Columbia Business School to train lawyers on business basics such as accounting, corporate governance and negotiations. Sounds like a smart move to develop more strategically qualified attorneys. As I’ve written about before, very few lawyers understand the language of business and therefore often cannot provide the cutting-edge legal advice clients need to stay ahead of the game or to fundamentally shift gears in a fast-changing world. One subject area Weil may want to stress in their relationship with CBS is strategic management. The concepts of value chain analysis, business models, and dynamic capabilities, e.g. are critical to business and thinking strategically to co-create and capture value for clients.

Story here.

flat lay photography of macbook pro beside paper
Photo by rawpixel.com on Pexels.com

 

Strategically assessing a contract

I’m now in that part of the semester when I teach contracts. It’s ironic that contracts was one of my least favorite subjects in law school but now it’s one the areas I most enjoy teaching. I’ve gained a strong interest in the subject since I’ve seen business success, contract drafting and negotiating all go hand in hand. None of that was taught in law school. Instead, we focused on abstract theories and cases that seemed far removed from everyday life and how business people engaged in the process of negotiating and deal making.

My approach to teaching contracts to business people integrates important doctrines with real-world examples and applications. From my perspective, contracting is another example of how the law can be used strategically. This leads me to the topic of how I teach people to engage contracts in a strategic manner. I view this as a fundamental business skill that can be followed in 5 steps:

1. Don’t be afraid to engage the document with a focused and critical eye. Read all the terms carefully and appreciate that nothing in the document is there by accident. Every word has a purpose and will have either a negative or a positive impact.

2. Not all terms are equally important. Identify the most important terms and rank them in order of most to least important. For example, in an employment contract it may be that salary, duration, the non-compete and termination are ranked among the highest. Be prepared to spend more time assessing and negotiating the key terms.

3. Assess the language of key terms to determine vagueness or specificity. Vague language offers more room for interpretation, which can be a good or bad thing depending on the circumstances. The opposite can be said of specific terms.

4. The best contract negotiators mark-up and edit the document with changes that reflect their preferences. This includes changing the language to be more specific or vague, striking unfavorable terms or modifying terms. Negotiating style and strategy can play an important role in this step.

5. Add language that’s missing. There is no such thing as a perfect or complete contract.

I always advise business people to engage in this practice to develop a strategic contracting legal capability, and of course to review the document with capable legal counsel just to be safe.

Legal strategy: The driver of legal change

Patent reform is back in the news as both the House and Senate have proposed their own versions of legislation in this complex legal area. The aim of patent reform is to further curtail the activities of the so-called patent trolls, which are companies that own patents, do not make any products and use patent law to sue large companies to collect jury verdicts or settlements. 

Since technology and innovation are growing in importance as drivers of wealth creation, it is natural that patent law would rise in importance. Since the economic stakes have increased, so have the stakes in the political and legal arenas. This could all be predicted by anyone who observes how powerful parties try to alter the legal and political system for their own advantage. From an academic standpoint, this was marvelously theorized and explained by the pioneers in the field of non-market strategy, who deduced the importance of engaging the legal, regulatory and legislative system as a form of strategic behavior. 

My recent writings in legal strategy support the view that law can be used to achieve competitive advantage. My most recent work addresses the abusive aspects of this practice and ways that can limit what I call “strategic legal bullying.”

What’s fascinating to me is that legal strategy is indirectly driving some important political wrangling in the current iteration of patent reform. From press accounts I’ve read, a hedge fund manager is using a transformative legal strategy to exploit a process to challenge drug patents while betting against the drug companies’ stock. Now, the drug companies want a legislative carve-out in place that would shield them from these administrative challenges. Their reaction to the hedge fund manager’s legal strategy is to change the law as it applies to their industry. 

What I’m starting to realize is that legal strategy has often been the agent of legal change, for better or worse. Think of Sony, Napster, Aerio, Uber, Tesla and the “patent trolls.” Their business models are closely tied to legal strategy. In some cases they successfully enacted legal change, and in other cases the status quo prevailed. The systems where this strategic behavior takes place is complex, consisting of companies, courts, administrative agencies, the media, and the legislature. Legal strategy lies at the core of the process and helps parties re-write the rules of the game, or at least try to do that. 

The value of international workshops

I recently had the honor to participate as a speaker at several intellectual property workshop in Buenos Aires organized by the Argentine National IP Office and the World Intellectual Property Organization (WIPO). The workshops were targeted to university administrators, IP managers, attorneys and entrepreneurs. 

This was my third involvement in such an endeavor, with prior engagements in Latin America and the Carribean. I love participating in these international workshops because I get the sense that there is a real need to move forward with local development in the area of innovation, entrepreneurship and value creation. I often teach these subjects in the U.S., but in these regions the thirst for learning and applying the material is palpable. 

I also personally benefit from these trips, which often take me to places that I would rarely consider visiting otherwise. In these trips, I gain a broader understanding of the world and the unique challenges each region faces. I also get to experience the warm hospitality that each region provides. For example, on my last day in Argentina a local attorney graciously provided me and another presenter with a day-long private  tour of Buenos Aires. I’ll never forget that experience. 

These travels help me understand the differences and similarities across regions. Among the differences are various levels of development, historical trajectories, and resource endowments. The similarities include national pride, unique opportunities and a desire to advance and compete in the global economy. 

Now that I’m back home I can look fondly on these experiences. I can also hope that I’ll be asked to participate in future international workshops, as they always provide an opportunity for professional and personal growth. 

Visiting La Boca
Evita in downtown Buenos Aires

  

Social Media Week Part VI – Social Media and CCO 3.0

A great post from top compliance expert Tom Fox at the FCPA Blog.

FCPA Compliance and Ethics Blog

Social Media VII conclude this exploration of the uses of social media in doing compliance by exploring why the compliance function is uniquely suited to using social media tools. Long gone are the days when Chief Compliance Officers (CCO) or compliance practitioners were lawyers housed in the Legal Department or the General Counsel’s (GC’s) office writing policies and procedures and then putting on eight hour training programs on same. Donna Boehme has written passionately about CCO 2.0 and the structural change to separate the CCO role from that of the GC because of the differences in focus of a CCO and GC. Simply put, a GC and legal department is there to protect the company while the CCO and compliance function exists to solve problems before the company needs protections from them.

Freed of the constraints to write policies and procedures by lawyers for lawyers, the profession has moved to integrating compliance…

View original post 1,745 more words

Innovation in the Legal Sector

Innovation is a big deal.

It’s been a big deal ever since customers rewarded differentiation and punished companies that failed to maintain their creative edge.

I never fully understood the role of innovation until I spent time as a post-graduate research fellow at the Kellogg School of Management’s Center for Research in Technology and Innovation (CRTI). I spent time at the CTRI (three years) after completing my law degree at Northwestern Law School.

In law school I never heard much about innovation and was never exposed to the subject in courses, or in any of my assigned readings. In hindsight, I now realize this was, and still is, a major failing of traditional legal education. Much has changed, however, since I graduated. More and more law schools emphasize entrepreneurship and clinical practice. Some law programs have fully and bravely embraced innovation as a major component of their curricula.

The role of innovation in the legal sector has yet to be fully analyzed, so in this blog post I’ll try to classify the different types of innovation occurring in this industry. Before I do that, however, I have to address: what is innovation?

Although it might seem easy to identify and define innovation, it’s surprisingly difficult. According to economist Joseph Schumpeter, widely regarded as the most important writer on the topic, innovation is a process initiated from “new combinations” initiated by entrepreneurs who unleash the gales of creative destruction within the economy. As a matter of degree, some innovations are incremental and others radical, as the important work by Harvard Prof. Clayton Christensen demonstrates. Studies show that the vast majority of innovation that captures value in the marketplace is incremental, although radical innovations get the majority of headlines, particularly when they displace existing businesses and become disruptive. As pointed out by Schumpeter and others, innovation is not the same as invention, since the vast majority of inventions (e.g. patents) are not commercialized and are thus worthless. Innovation has to possess some commercial validation and success.

These are core definitional aspects, but what captured my interest were the organizational factors behind innovation success and failure. Through my readings and conversations with CRTI faculty members and fellows I came across important organizational perspectives. For example, during most of the industrial era firms employed an internally-focused view of innovation. This closed R&D perspective often yielded a hermeneutic culture that led those within the firm to view outside innovations with skepticism, or outright disdain. This approach (which still exists among some firms) yields the infamous “not-invented-here syndrome” which is a bias against external innovations. This closed perspective proved dangerous and untenable as we shifted into the Knowledge Economy. In this context, licensing innovations externally from startups, universities and independent inventors proved to be a successful innovation model. The research of Prof. Henry Chesbrough yielded important insights into the practice of open innovation, which relies on knowledge transfers.

For me, one of the greatest insights on innovation came from CRTI faculty member Prof. Mohan Sahwney, a globally recognized innovation thought leader. In his 2006 MIT Sloan Management Review article “The 12 Different Ways for Companies to Innovate” he and his co-authors laid out a framework called the “Innovation Radar” that helps companies look at innovation from multiple perspectives along four major dimensions:

Offerings (What)

Customers (Who)

Process (How)

Presence (Where)

As the article points out, product-centered companies often myopically emphasize offering-related innovations and neglect the other three major categories. Successful innovators such as Home Depot innovated along the lines of Customers as it targeted a new DIY home repair customer segment. Dell was able to capture value by innovating along the Process dimension by creating new manufacturing methods and a direct-to-consumer sales model. Redbox innovated along the Presence dimension since it introduced the concept of DVD rentals at an entirely new location (supermarkets). The holistic “business innovation” perspective offered by the Innovation Radar offers a comprehensive tool to diagnose where innovation occurs and how it leads to value capture and differentiation. The article magnificently discusses these four major aspects of innovation and introduces eight other dimensions that build from the four major categories and which altogether comprise the “Innovation Radar”:

Innovation Radar

Source: Sawhney, Wolcott & Arroniz (2006)

Richard Susskind, Ray Worthy Campbell and Michael Katz and others have all written about, and in some cases helped pioneer, legal services innovation. The legal services industry is facing rapid transformation and innovation. In fact, legal hackathons are becoming increasingly popular and offer a platform for engineers and lawyers to brainstorm and develop new ways to simplify the legal system.

Here is a brief attempt to identify some (not nearly all) of the innovations in the industry introduced since I graduated from law school nearly ten years ago, and that apply to the four major Innovation Radar categories:

Offerings (What):

  • One of the key elements of legal practice is the ability to conduct comprehensive legal research. Casetext and FastCase are two recent innovators that use a crowdsourcing method for legal research
  • The art and science of effective legal practice often hinges on giving accurate predictions about the merits of a case. Lex Machina and IBM’s Watson supercomputer offer big data predictive analytics services to lawyers.
  • Previously, only attorneys could dispense legal advice under state bar rules. The state of Washington has pioneered a new category of Limited License Legal Technician, a non-lawyer who can provide legal advice in limited areas of practice.

Customers (Who):

  • Lower income individuals and small businesses were traditionally priced out of legal services, but the innovative delivery methods offered by companies like LegalShield offer a prepaid plan to market low-cost services to these customers.
  • LegalZoom also services lower income individuals and small businesses and offers monthly rate plans and standardized forms online.

Process (How):

  • RocketLawyer is a pioneer in crowdsourcing legal advice among various attorneys through its website.
  • The Avvo website is a question and answer (Q&A) website that also crowd sources legal advice from attorneys.
  • Many innovative companies have perfected techniques for managing the e-discovery process during litigation and have developed new technologies to manage this complex legal process.

Presence (Where):

  • Wal-Mart has started to offer fast and affordable legal services at some of its locations.
  • Several of the companies identified here, such as FastCase offer apps that are available for use on mobile devices

The period of rapid innovation and transformation in the legal services industry is here. It’s both interesting and exciting to watch it unfold, and to see innovations occur among all the dimensions of the legal services business system.

Terroir and the curious path to geographic indication. 

This week I was honored and pleased to participate in the “Sub-regional workshop on geographical indications/ origin-linked products in Kingston, Jamaica. The event was coordinated by various governmental and international trade organizations including: WIPO, CEDA, EU-Caricom, IDB and JIPO.

A geographic indicator (GI) is a specific product name that has trademark-like protection and exclusivity as long as the product characteristics, or reputation is due to its place of origin. This idea of place has great importance and is referred to as “terroir” in Europe. A clear and scientific connection between product and place of origin and its connection to culture, tradition, heritage and processes are all linked to this interesting concept in international trade and IP law.

This legal issue has great commercial relevance since the market for GIs is estimated at more than $50 billion. Some of the most popular GIs include Champagne, Port (the oldest GI), Roquefort, Tequila, and Darjeeling.

The aim of the workshop was to build capacities in the Caribbean for the registration of GIs in the area, connect stakeholders and raise awareness.

Registering a GI is a three step process:

1. Form a producer group/ association, e.g. Co-op farmers from Belize were present to discuss efforts to develop a GI for cocoa from the Toledo region (terroir) in that country.

2. Develop a scientific product specification with verified protocols and standards. Elements may include: production methods, livestock regimes, plant varieties, traditional practices. The terroir must be described in detail. Boundaries and unique territorial aspects should be included, e.g some coffee must be grown at certain elevations and with certain soil conditions. The link between product and terroir must be scientifically established to establish uniqueness and source origin.

3.  Control production to guarantee customers of origin and authenticity.

Once these are all established a producer group may reap the benefits of a GI system and enjoy market exclusivity and higher margins for their unique products. Consumers can enjoy consuming the product knowing that the product is sustainably sourced from a legitimate producer group with strong historical and cultural connections to the terroir.