ATTORNEY ADVERTISING

Editor’s NoteFollowing the news is a scaryprospect these days. The stock mar-kets are roller coasters. Investmentbanks have failed. Venture capitalists(and consumers) are wary. Productliability suits are mounting. If youweren’t an optimist, if you didn’tbelieve in the power of innovation toovercome obstacles, you might beready to pack it in and wait for thenews to improve. But the truth is thatinventiveness, resiliency and pre-paredness can temper—and help youfind a way around—these bad times.As we report in this issue, several techsectors (in particular, green IT) arestill riding high (page 3), venture cap-italists are contiuing to put moneyback into infrastructure (page 7), andtech companies are well-primed toavoid the product-liability firestormthat has run through other industries(page 8). So, take heart. And read on.

2 risks&rewardsMaking the Arcane Accessible Plus: Weathering the recession; a bigimpact from small changes in compensation filings; Sophia Corona stayscalm; avoiding foreign corrupt practices; microcredit and world poverty;partnering right—and smart; and exporting cryptographic technologies.

8 C O V E R S T O R YCould This Happen to You? Technology-based operations are betterprotected against product liability suits than are other industries, but thepotential never disappears. A company’s preparedness on many levels—including marketing, insurance and licensing—can keep it at bay.

14 interviewCommunispace’s Diane Hessan “If they’re bonding, they’re morelikely to have conversations that answer the questions you forgot to ask.”

16 T E C H 4 T E C HCutting Costs with Cloud ComputingPlus: green marketing guidelines; decidingwhich diseases get treated; stemming unau-thorized software use; and four good reads.

20 a look backJustice Rides on a Snail’s TailOne woman’s ginger beer sets a legal precedent and foreshadows an eraof product liability suits.

Fall/Winter 2008

A Custom Publication Produced for Goodwin Procter LLP

by Leverage Media LLC

Dobbs Ferry, NY

Editor: Michael Winkleman

Art Director: Carole Erger-Fass

Production Director:Rosemary P. Sullivan

Copy Editor: Sue Khodarahmi

Cover Photo: Chip Simons

© copyright 2008 by Goodwin Procter LLP

All rights reserved.

what’s insidewhat’s inside

PRINTED ONRECYCLED PAPER

This publication may be considered advertising under the ethical rules of certain jurisdictions.

BOSTON Exchange Place, 53 State Street, Boston, MA 02109 617-570-1000 • LOS ANGELES 10250 Constellation Boulevard, 21st Floor, Los Angeles, CA 90067 310-788-5100 • 601 South Figueroa

Street, 41st Floor, Los Angeles, CA 90017 213-426-2500 • NEW YORK The New York Times Building, 620 Eighth Avenue, New York, NY 10018 212-813-8800 • SAN DIEGO 4365 Executive Drive,

3rd Floor, San Diego, CA 92121 858-202-2700 • SAN FRANCISCO Three Embarcadero Center, 24th Floor, San Francisco, CA 94111 415-733-6000 • SILICON VALLEY 135 Commonwealth Drive,

Menlo Park, CA 94025 650-752-3100 • WASHINGTON, DC 901 New York Avenue NW, Washington, DC 20001 202-346-4000

Goodwin Procter Offices

Communispace’sDiane Hessan

Robin Raskin wasn’t thinking abouttechnology back in 1980 when her hus-band came home one night with a VAXterminal and taught her UNIX.Finding herself in the right place atthe right time as consumer electronicswere beginning to boom, Raskin—whowas also a journalist—began writingabout sometimes arcane technology ina way that readers found particularlyaccessible. This led her to become edi-tor of PC Magazine, to launch FamilyPC magazine in partnership withDisney and Ziff Davis Publishing, andto create a blog for Yahoo.

But after more than 20 years, shesays, “always having to be the firstone to break a story about a new com-puter or gadget had become very tir-

ing. I couldn’t understand why Icouldn’t just write the best, cleareststory instead of the first story. I need-ed to build something that would last.”

Raskin also believed it was time tomove away from print media. Havingalready established herself as both alecturer and television personality,she felt that finding a new mediumwas simply an extension of what she’dalready been doing.

So in early 2002 she partneredwith the Consumer ElectronicsAssociation to create shows, she says,“that would allow me to bring newvoices to the dialogue about technolo-gy. Trade shows can be ghettos, draw-ing one type of attendee. I’m bringingtogether hardware, legal, education,

MASS COMMUNICATIONS

A JOURNALIST-IMPRESARIO MAKESTHE ARCANE ACCESSIBLE

risks&rewardsYour ReportingHeadaches, EasedDisclosure rules can be a headachefor executive compensation commit-tees because of their complexity andseemingly arbitrary distinctions.The Sarbanes-Oxley Act led theSEC to adopt rules that resulted in asurge of compensation-related Form8-K filings, which sometimesbrought needless speculation aboutcompanies’ expectations and fore-casts, says John Newell, senior coun-sel in Goodwin Procter’s Securities& Corporate Finance Practice.

Fortunately, the SECreleased new guidelines lastspring that can reduce the needto file extraneous Form 8-Kreports. “Relatively smallchanges in the nature and tim-ing of compensation decisionsmay reduce the frequency ofmandatory Form 8-K reporting,and the time and expense devot-ed to filing Form 8-Ks,” Newelland his colleagues write in aGoodwin Procter Client Alert,“SEC Updates ExecutiveCompensation ReportingGuidance.” (The full Alert isavailable at www.goodwinprocter.publications.aspx.)

For example, companies mustreport adopting new equity com-pensation or cash bonus plans.But no Form 8-K is needed whenspecific goals are set for a perfor-mance period or a cash bonus ispaid, if it is consistent with a pre-viously disclosed plan. The guide-lines can be “a roadmap to helpcompanies structure and admin-ister compensation plans,” theattorneys write. —R.S.

BY PETER HAAPANIEMI, JEFF HEILMAN, ROBIN MORDFIN AND RICHARD SINE

2 big ideas

policy and content experts to talkabout the potential for engagementwith these technologies.”

Raskin called her companyLiving in Digital Times and hired acadre of people to put togetherwebsites and plan shows thatwould, in her words, “make technol-ogy palatable.” Starting with ashow called “Last GadgetStanding,” in which 10 productswere introduced to an audience thatthen voted on the most impressive,she traveled to places as diverse asLas Vegas and the Middle East,becoming, she says with a smile, “asort of mini-celebrity in Dubai.”

Last year, she did her first full-scale, sold-out show at theInternational CES 2008 in LasVegas. Called “The SandboxSummit” (now “Kids@ Play”), theshow focused on Internet safetyand kids’ digital play. This year,she’s renting three times the spacefor “Kids@Play” and has added anew show, “The Silvers Summit,” aconference and exhibit focused ontechnology for aging BabyBoomers. Over the next five years,she’d like to add a show with a dif-ferent target each year.

“My goal is that when people goto CES, they’ll have options. Theycan gawk at new products but alsohear from thought leaders abouthow these products fit into theirlives,’” Raskin says. “The world isready for more refined trade showsthat play to a particular demo-graphic and address the issues thatconcern those people. This wouldmake for savvier technological con-sumers—something we sorely needif we’re going to retain an edge inthe global market.” —R.M.

ds

big ideas 3

With the U.S. financial system shaken to the core, few corners of theeconomy are immune from downturn. In the tech sector, though, hereare four areas that just might have the insulation to ride out the worstof the certain storms ahead:

• Virtual Entertainment: As fuel-strapped Americans took “staycations”in 2008, the economy kept more consumers at home, where theychanneled their money toward computer games, video rentals andother virtual entertainments. As leading private equity firm VeronisSuhler Stevenson bullishly reports (see chart above), “Consumers useentertainment media to relieve economic stress.”

• Virtualization: By sharing the resources of a single computer acrossmultiple environments, virtual servers and desktops do the work ofmultiple computers with such benefits as lower capital expenses, bet-ter desktop management and increased security. Storage virtualiza-tion provider DataCore Software scored a $30 million equity invest-ment, following four rounds totaling $85 million; VMware announceda $100 million investment in a new development center in India.

• Green IT: While clean tech and alternative energy attract attentionand investment, the new buzzword is Green IT. Running corporatecomputers and data centers consumes an enormous amount of powerwhile generating excessive heat; CIOs are thinking about environmen-tally friendly ways to keep it all running and cooled off.

• Mobile Web Analytics: As the online ad market becomes increasinglycompetitive—online ad spending was worth over $25 billion this year, up23 percent from 2007—and more of the world goes online while on thego, the need to measure consumer behavior is surging. Online video audi-ence measurement startup Visible Measures Inc. is one success story:after attracting two rounds of funding earlier this year, the company, itsViral Reach Database now containing tracking data on more than 100million unique videos, recently announced a deal with MTV Networks tomeasure broadband video activity across over 340 of its sites. —J.H. CH

ART B

Y ALE

X REA

RDON

TREND WATCH:

What Now?

SOURCE: VERONIS SUHLER STEVENSON

risks&rewards

BY SOPHIA CORONA

Sophia Corona is CFO of Creditex, apioneer in the electronic processing ofcredit derivatives. Over the pastdecade, she has guided several com-panies through early stage develop-ment to successful exit strategies—and most recently, helped forge the$625 million sale of Creditex toIntercontinentalExchange.

Rather than any particular event thatI would want to do over, there are anumber of things that add up to someimportant lessons about navigating anew company through to the pointwhere it is sold.

For example, I’ve learned that it’swise not to jump at the first offer.With Bigfoot Interactive, the onlinemarketing company where I wasCFO, we had an early offer of $8 mil-lion. We easily passed on that, butthen had another offer about a yearlater for $37 million. That was harderto pass up, but we believed we had a

good plan with good technology—andso did the marketplace. Just two andhalf years after that first offer, wesold the company for $129 million toAlliance Data Services, a deal thatwas worth waiting for.

Another lesson: “Equity isn’talways equitable.” Too often, compa-

nies don’t take the time up front tocreate a clear plan for using stockoptions across the different phases ofthe company’s life cycle. As a result,they may run into problems, such asgiving too much to consultants earlyon and not having enough to provideincentives to key employees later.

I F I H A D I T T O D O O V E R …Stay Calm. Be Ready to Deal

Staying Off the TakeFor U.S. businesses, Asia hasemerged as an area for both sourcingand selling. As growing tech compa-nies pursue these opportunities, how-ever, they need to keep an eye on theU.S. Foreign Corrupt Practices Act,which essentially prohibits the pay-ment of bribes to foreign officials.

Unlike large corporations, small-er firms often don’t have a robust

compliance infrastructure in place,and so may be more likely to runafoul of the FCPA, says KyleWombolt, a partner in the SecuritiesLitigation Practice at GoodwinProcter. Avoiding trouble is not assimple as it might seem. For exam-ple, in countries such as China andVietnam, local companies often havesome level of state ownership, whichmakes their employees governmentofficials in the eyes of the U.S.Justice Department. Tech companiesmay also mistakenly feel like they

are in no danger because they relyon third parties, such as sales agentsor consultants, for in-country work—only to find themselves in troublewhen those representatives startproviding payments to governmentofficials for licenses and access.

“The law says that you can’tdirectly pay a bribe, but it also saysthat you can’t make payments to aperson while knowing that a portionof those payments will be passed toa government official,” saysWombolt. “You’re not allowed to just

STEV

EN FR

EEMA

N PH

OTOG

RAPH

Y

4 big ideas

For tech executives, leading or join-ing a buyout can be an exhilaratingexperience. “It’s an opportunity tomake serious money as an ownerand to lead an executive teamthrough what is often the mostelectric phase of a business’sgrowth,” write John LeClaire, chairof the Private Equity Group atGoodwin Procter, and his coauthorMichael Wilson of TA Associates ina recent article in ThomsonBuyouts newsletter, “PartneringRight, Partnering Smart.” (The fullarticle is available at www.goodwinprocter.com/publications.aspx.).Choose the wrong financial partner,however, and the experience “canbe as unpleasant as a bad mar-riage,” they add.

Good personal chemistry, opencommunication and realistic expec-tations are key to a good relation-ship, the authors write. Withoutthese fundamentals, problems mayquickly emerge. “In most buyouts,first-year performance is a keyindicator of ultimate success andfailure,” LeClaire and Wilson say.“Few things are more embarrass-ing for a financial partner than

writing down an investment short-ly after making it.”

In choosing financial partnerswith competing bids, managersshould consider more than theusual concerns of value, terms andcertainty and execution. For exam-ple, is there a shared vision of agrowth strategy, exit plan andmanagement structure? Does thepartner prefer a hands-on orhands-off style? And, what do ref-erence checks say about how thepartner will react to a crisis or topoor performance?

Once a solid financial partnerhas been chosen, executives canturn to the management portion ofthe deal. Among other issues, exec-utives should consider the size oftheir equity stake, its position inthe capital structure, and its taximplications. The tax issue “is thearea where money is most oftenleft on the table,” the authorswrite. Rather than receiving stockoptions, many managers preferrestricted stock. On exit, thesemanagers will realize capital gains,which are taxed at a lower ratethan ordinary income. —R.S.

ERIC

GIR

IAT/IM

AGES

.COM

BUYOUTS: MAKING THEMARRIAGE WORK

big ideas 5

I also remind people to “knowwhat you don’t know.” Deals havebecome more complex, and you haveto think about a range of legal,finance and tax matters. Therefore,you should consult advisers early onand make sure you have your house inorder. Entrepreneurs tend not tothink about these things when they’restarting and running a company, but alot of people become interested inthese factors if a deal is in the works.The buyer will be armed with theirown experts looking for issues thatmight reduce your price—and they’reusually good at what they do.

Perhaps the most important les-son I’ve learned is, “stay calm.” Youwill inevitably hit some twists andturns along the way, whether it’s innegotiating the deal, due diligence orgetting from signing to the closing.You have to keep communicating andmanaging people’s expectations.When things go wrong, you just haveto take a deep breath and workthrough them.

put your head in the sand. The gov-ernment takes the position thatyou need to do some due diligenceand background checks on theagents you retain.”

To help avoid problems, techcompanies need to assess andunderstand the risks. In addition,says Wombolt, “they should consid-er putting an FCPA complianceprogram in place that will providetraining to employees—and puteverybody on notice of what is andwhat is not allowed.” —P.H.

With the global credit crisis current-ly paralyzing available capital, techcompanies are constrained in theirstrategic options. Here are a few tac-tical considerations for staying oncourse until the credit market thaws. Broaden the Reach U.S. tech compa-nies dependent on local customerswould do well to expand into foreignmarkets, where broader tech spend-ing, the weaker dollar and higherdemand can help offset shortfalls inthe U.S. In fact, U.S. companieswith an established internationalfootprint have been performing farbetter this year than their home-bound counterparts.

A good example is CentralEastern Europe’s burgeoning tele-com and Internet economy. WithEU-mandated competition and regu-lation opening up the markets, risingdemand for communications andbroadband-related products and ser-vices is creating new opportunities inthe Czech Republic, Poland andother CEE countries.Protect the Money Lesson learnedfrom the 2001 tech bust: Keep cashon hand. The difference today is thatthe tech sector is awash in rainy daymoney. As of this summer, reports

The Wall Street Journal, tech com-panies were holding some $232 bil-lion in cash and cash equivalents, upfrom nearly $218 billion in 2007 (thesame amount, by the way, borrowedby investment and commercial banksfrom the Federal Reserve inSeptember as emergency loans).

Cash reserves limit the need toborrow—just don’t sit on the money,writes 24/7 Wall St.’s DougMcIntyre. “Wall Street does not liketo see ‘unused’ cash sitting aroundmaking 2.5 percent interest.Companies that do not haveannounced M&A programs, bigshare buy-backs, or special dividendsare going to be punished for balancesheets that are too good.”Acquisitive Minds The IPO freeze-outand private equity vacuum havewarmed up the M&A market.Merger fever has been especiallyprevalent in the life sciences market,which attracted a shower of invest-ments in early 2008 before fallinginto a capital-raising drought. Thebiotech market in particular has seenan unprecedented wave of billon-dol-lar-plus consolidations, led byRoche’s massive $43.7 billion offerfor Genentech. —J.H.

LEARNING TO COPE

Silver Linings? How an economic downturn can alterthe IPO landscape—and that wasbefore the Wall Street meltdown. Last year was a veritable feast, as273 companies sailed through publicofferings. Frozen out by an icy stockmarket, though, the 2008 seasonsaw only 43 companies go public byLabor Day. First-time venture financ-ings are also down, buoyed by moreoptimism on the late-stage andexpansion fronts. The software andbiotech sectors attracted almost $2.5billion in the first half of 2008, withInternet deals up and clean techholding steady.

Public exits, however, all but dis-appeared. According to Dealogic,only four U.S. tech companies hadattempted public debuts by this sum-mer, with no venture-backed IPOs inthe second quarter, the leanest since1978. And with the collapse of majorIPO underwriters like LehmanBrothers, the tech IPO market willremain dark for some time ahead.

Even the bad weather days fol-lowing the 2001 downturn were notthis bad, but VCs are actually findingopportunities in the current econo-my. After a period of investing heavi-ly in social media networks such asFacebook, VCs are putting moneyback into infrastructure, with a par-ticular focus on “cloud-computing.”

High fuel prices come with theirown silver lining, as energy woeshave spawned great interest in alter-native energy. According to leadingIPO tracker Renaissance Capital,one-third of the 17 companies filingfor IPOs by late August were greenenergy companies.

What’s ahead? With credit mar-kets frozen and equity markets aroundthe globe destabilized, that’s the $700billion bailout question. —J.H.

6 big ideas

ROY S

COTT

risks&rewards

Help Poor Entrepreneurs at Zero Cost

Ever since the Second World War,when the U.S. Navy won the Battle ofMidway by deciphering the encodedcommunications of Japanese comman-ders, the American government haskept a close eye on the export of cryp-tographic technologies. This poses achallenge for the software industry,because nearly every program thatsends or receives data on a networkuses some form of encryption, saysMiguel Danielson, an associate inGoodwin Procter’s IP practice.

Most software executives are notwell informed about the laws thatgovern encryption exports, Danielsonsays. But regulators are moving toheighten the penalties for noncompli-

ance, which can include fines, revoca-tion of export rights and even crimi-nal prosecution. Generally, theCommerce Department requiresobtaining a license for export of con-trolled technologies, a process thatcan be complex and time-consuming.

Fortunately, Commerce has grad-ually increased the number ofexempted technologies, particularlythose distributed in retail softwareand hardware channels. But whetheran exemption applies depends on theparticular facts of the case, and evenwhen an exemption applies, a filingwith Commerce is usually required.The law also prohibits exports of allgoods to certain individuals and enti-

ties, so any company that regularlyexports goods should have in place ascreening procedure that detectsexports to prohibited parties.

All too often, exporters don’t findout they’ve violated the law until theexport has occurred, Danielson says.In those cases, the cost and disruptionof investigating for possible voluntaryself-disclosure can be very high. Withproper understanding of the law,exporters can avoid this problem.

Danielson provides more details in“Scrutiny Intensifies for EncryptionExports,” an article in IP Advisor, aGoodwin Procter newsletter. The fullarticle can be found at www.goodwinprocter.com/publications.aspx. —R.S.

The impoverished craftsperson sell-ing her goods in a Panamanian vil-lage and the netpreneur poundingout code in a Palo Alto breakfastnook have one thing in common:They live by their wits. No wonder,then, that so many in the techindustry are entranced by the ideaof microcredit, in which people wholack access to loans are given smallloans to grow their businesses.

Take MicroCredit EnterprisesInc., which has enabled financing for95,000 “micro-entrepreneurs”around the globe since 2006.MicroCredit Enterprises suppliescapital to microfinance organizationsthrough an innovative program thatallows people to help without spendinga dime out of pocket. So-calledGuarantors guarantee loans to thepoor based solely on their own assetsand credit worthiness. “It’s leveragingoff peoples’ capital to support venture

capital financing for these [small] busi-nesses overseas,” says John Ferguson,a partner in Goodwin Procter’sBusiness Law Department, whohelped structure and documentMicroCredit’s philanthropic guaranteeprogram on a pro bono basis.

To date, the nonprofit hassigned up 37 Guarantors, each ofwhom represents $1 million ofguarantee value and backs up to5,000 business loans. They includelegendary Silicon Valley venturecapitalist Arthur Rock, AOL veter-an James Davidson and managingdirectors at two VC funds.

While most Guarantors are indi-viduals, MicroCredit CEOJonathan Lewis hopes to increasethe number of companies that signup. “As a corporate social responsi-bility program, our model is attrac-tive because companies can make ahuge impact on global poverty with-

out directly writing a check,” saysLewis, who also works pro bono. “Inthese times of tight profit marginsand uncertain economics, it is nice tobe able to make a difference in thelives of thousands of people withoutsacrificing the bottom line.” —R.S.

LOOSE CRYPTO SINKS SHIPS

big ideas 7

MICH

AEL S

. KLE

IN/IM

AGES

.COM

couldthiscover story

8 big ideas

Technology-based operations are better protected than others,

but the potential for liability never disappears.

Your preparedness on many levels can keep it at bay.

The phrase “product liability” can send shiversdown the spine of a business owner. And for goodreason. Modern plaintiff awards in liability casescan be mind-boggling. In the well-publicized Vioxxcase, for example, 58,000 claims were filed againstdrugmaker Merck, which is spending nearly $5billion to settle them. Deep pockets or not, nocompany wants to be hit with something like this.

Killer settlements can have an upside ifmanagement learns from its mistakes, improvesoperations and vows to “never let that happenagain.” A more prudent and cost-effective wayto achieve the same upside is to review yourbusiness’ product liability exposure early andoften, and take the various—and comparativelyeasy—steps that can help protect against it.

Technology’s Edge

For tech businesses, potential liability exposureis vastly more contained than that of consumer

industries. In the eyes of the law, strict liability,for example, more directly refers to makers ofproducts used by consumers and the damages,often physical, that could occur due to a productdefect. Makers of food products, cigarettes,tires, and countless others items are exposeddaily not only to the whims of consumer inter-pretation and use of their products, but thethreat that a poorly made product might causeinjury or death, possibly on a large scale. Bycontrast, most tech sectors still serve business-to-business markets where product use and theexpected results are typically specific and well-defined. Here, “negligence” is the term moreoften used to describe manufacturer culpabilitywhen products are found to be defective.

This does not mean tech companies areexempt from liability exposure. Far from it.Take life sciences, for example, a sector thatincludes companies in pharmaceuticals, biomed-ical technologies and devices, life systems

BY RICK CARTER

PHOTOGRAPHY BY CHIP SIMONS

big ideas 9

tohappen

you?

technologies and other areas. “Product liability in life sci-ences is huge,” says Ray Zemlin, a partner in GoodwinProcter’s Life Sciences Practice. “And it’s easy to come upwith prominent examples of issues that have resulted inextensive litigation and big judgments.”

To make his point, Zemlin rattles off recent cases thathave involved problems with internal and external defib-rillators, angioplasty balloons, breast implants, artificialhips and knees, and pharmaceuticals, both prescriptionand over-the-counter. “These all involve sophisticatedcompanies,” says Zemlin. “But despite their best efforts,there will always be some device or other product thatdoesn’t operate as intended.” And despite careful designand extensive clinical testing, one reason many productsfail—those in life sciences and other industries—is under-stood by manufacturers the world over: continuous error-free production is impossible to achieve. Despite theworld-class production and quality systems tech compa-nies typically use, the fact that someday some product willmalfunction is guaranteed.

Zemlin acknowledges this inevitability, but also knowsthat with superior product design, there can be ways to

ensure that if a product fails, safety need not be compro-mised. “If a malfunction could result in a significant safetyrisk,” he stresses, “then you have a specific set of circum-stances that can be addressed.”

For example, dialysis devices, monitors and drugdelivery devices intended to be used by patients outsideclinical settings need to be designed not only to be easy touse, but also to detect a patient’s misuse of, or a defect in,the product. “When medical devices are used by patients,the opportunities for patient injury are increased many-fold,” says Zemlin. The absence of a clinician means thatno one will be able to detect that the device is malfunc-tioning or being misused. Moreover, the patient may use adevice with other products or medications, which maytrigger unexpected adverse consequences. According toZemlin, “To the extent the device is designed to minimizea patient’s ability to misuse it, and to include alarms orwarnings if it isn’t functioning properly, the chance ofpatient injury and the resulting product liability lawsuitwill be reduced significantly.”

This underscores what Zemlin says is the need for techcompanies to “design in safety and self-testing features so

Despite world-class production and quality systems, the fact is that someday

some product will malfunction.

10 big ideas

“You never want to find out after thefact that there was something moreyou could have done,” says GwynWilliams, a partner in GoodwinProcter’s Products Liability Group. But,of course, this happens to companiesall the time. They’re sued regularly, andthose that have not conducted reviewsof their products or operations with aneye toward preventing a product-liabili-ty lawsuit are often caught unprepared.What’s the first thing to do?

“Get your arms around the prob-lem,” says Tom Mikula, a partner inGoodwin Procter’s Products Liability

Group. “Make sure youhave the potentially relevantdocuments. You also want to makesure that any effort to comply with thecompany’s document-retention policy isstopped at that point insofar as it con-cerns the product at issue.

“Second,” he continues, “youwant to very quickly start an investiga-tion. How serious is the problem?What’s the potential liability? That willrequire a thorough review of docu-ments, and talking to the people whoare or were involved. This means current and former employees—anyone

who was involved in theprocess of manufacturing, design-

ing or selling the product at issue.”The next goal, says Mikula, is to

determine if the liability charge hasmerit. And if a company feels it faces aserious liability claim, a decision mustbe made to settle or defend. While mostproduct-liability cases result in settle-ment, Mikula says trends show morecases going to court. Either way, if alawsuit is filed, “the company needs toengage outside counsel. And if it’s a sig-nificant lawsuit,” he says, “they willinevitably have to do follow this course.”

What If You’re Sued?

the product can automatically test itself, and, if possible, acti-vate an alarm so that the user will know it isn’t working.”

Considering the many years and countless tests techproducts often undergo before being marketed, this type ofeffort is very possible, says Zemlin. It is also expected tobecome significantly more important for tech companies asnew areas like nanotechnology and automation extend theirimpact on the lives of everyday citizens. With nanotechnol-ogy, for example, details of this world of submicroscopicparticles are just beginning to be understood. As moreproducts are made by manipulating molecules at the atomiclevel, the risk rises dramatically for unanticipated health-and safety-related side effects. Already some liability insur-ers are specifically excluding claims based on harm causedby nanotech products from general liability coverage

Similarly, automation technology could generate newforms of risk in the transportation field if San Diego’s cur-rent plan to implement Swoop Technology’s robot-con-trolled buses on its freeways is a success. Special robotlanes on Interstate 805 are expected to allow the buses totravel as close as train cars at high speeds. Drivers will beaboard, but the companies that provide the automatedcomponents for the buses will nonetheless be obligated toaddress the safety and reliability of their products in acompletely new way.

Common Concerns

When it comes to the nitty-gritty of design issues, Zemlinadmits the tech companies “are well ahead of the lawyers.”This is not to say that legal participation does not exist atthis level, but rather that it’s usually more significant inothers. For life sciences companies, for example, this caninclude guidance related to staying on top of currentrequirements, recommendations and guidelines establishedby the U.S. Food and Drug Administration.

“All of the life sciences companies are inspected by theFDA on a regular basis,” says Zemlin. And while this hasthe intended effect of keeping standards high, it also adds alayer of complexity to doing business that manufacturersmust understand. Not doing so, he says, can result in situa-tions every bit as undesirable as a high-stakes product lia-bility lawsuit: product recalls, fines, and, in dire cases,FDA-ordered company shutdowns. Zemlin stresses, howev-er, that the value of regular procedural reviews of a compa-ny’s FDA status goes beyond the legal need to maintainregulatory compliance. “They’re good business practice,”he says, “and they’re good for patient safety,” both of whichbode well for a company in the long run.

Beyond the products themselves, however, tech busi-nesses need to be aware of other areas of liability exposure,

big ideas 11

Class-action suits don’t typicallyinvolve tech companies. But thatcould change as high-tech trendslike nanotechnology expose more ofthe population to potential—andpotentially unknown—tech-relatedproblems. Not all liability casesinvolve class-action suits, but thistype can be the most damagingbecause it involves large numbers ofplaintiffs. And until the Class ActionFairness Act of 2005, many businessgroups felt the playing field favoredthose plaintiffs by allowing too manyclaims to be tried, resulting in toomany oversized judgments.

The Act’s strength is that it givesfederal courts jurisdiction in certainclass-action suits where contestedamounts exceed $5 million. Statesretain jurisdiction only if at least two-thirds of the defendants are from thesame state. The federal/state distinc-

tion is critical because businessgroups have long felt that many largeclass-action judgments have resultedfrom plaintiff-favorable conditions instate courts.

“The big effect of the Act isthat it’s now relatively easy to getthese suits into federal court,” saysKen Parsigian, chair of GoodwinProcter’s Products Liability Group.It’s a key change from the past whenstate courts always weighed in firston class-action suits. From a defen-dant’s perspective, the problem withthe old system was that state judges,because they are mostly elected, canbe influenced. In the federal system,judges are appointed and theoreti-cally more fair.

“In the states, the plaintiffs’lawyers hold sway with the judgesbecause they contribute a lot ofmoney to them,” Parsigian adds.

The practice is particularly evidentin certain counties in Florida,Illinois, Louisiana and Mississippi.One of these counties “has hadmore class actions than any jurisdic-tion in the country,” says Parsigian.“Even though it’s a small jurisdic-tion, plaintiff’s lawyers file therebecause they always certify the classactions. And certification makes allthe difference. An incredible amountof money is spent by plaintiffs tryingto keep cases in state court and bydefendants trying to move them tofederal court.”

An intent of the Class ActionFairness Act was to eliminate thisparochial advantage and get casesinto federal court “where it’s muchharder to get weak claims certified,”says Parsigian. This, he adds, canhave a “bet-the-company effect” onhow things turn out.

THE CLASS ACTION FAIRNESS ACT:

One for the Defense

from warranty and promotional information tolicensing agreements and insurance coverage.While these may seem to lack the immediacy ofregulatory-based concerns, they will, if ignored,prove no less important. “A lot of businesses don’tthink of all the ways they should protect them-selves,” says Gwyn Williams, a partner in GoodwinProcter’s Products Liability Group. “This includes materi-als that might go along with their product, such as productpackaging, advertising and, if they have sales reps, thekinds of things they might say. Basically,” she says, “it’s allof these ‘informal’ things that they don’t think of as beingrepresentations about their product but that, under the law,are just that.”

Most businesses do know to have their legal team lookat warranties and warranty disclaimers, particularly in thesoftware industry. With the advent of downloadable soft-ware, these companies took advantage of computer accessrestrictions to ensure that users would agree to the soft-ware’s warranties and disclaimers before the product couldbe installed. “This is what we call a ‘click-through’ or a‘click-wrap’ agreement” says Mark Macenka, a partner inGoodwin Procter’s Technology Companies Group. “Beforeyou can download, you have to agree to the terms.”

For more enterprise-based software programs, such asthose that would control manufacturing processes or ERPsystems, Macenka says, “this information would be insigned license agreements.” He adds that even softwareavailable at retail typically includes prominent and detailedwarranties or disclaimers on the product box or encloseddocumentation (known as a “shrink-wrap” agreement).

As anyone following the headlines knows, consumersoften provide the flash point for real liability issuesagainst manufacturers. Sometimes all it takes, saysWilliams, “is someone who has decided that you said thiswas the fastest whatever, this could do X, and it doesn’talways do X. Maybe it does X most of the time or undercertain circumstances, but there were no caveats for that.Then they say, ‘We want our money back.’ And if ‘we’means everybody who ever bought it, then you can startgetting into some real money.”

These types of cases—mass torts or class-action law-suits—are what strike fear in the hearts of business ownersand executives because they can involve large settlements.And, for better or worse (both sides can be argued), thesecases are as likely to be escalated by law firms that special-

ize in starting them as they are by disgruntledconsumers, if not more so.

“Firms do this for a living,” says KenParsigian, a partner in Goodwin Procter’s

Products Liability Group. “They’ll go online andsee what people are complaining about. And because

state consumer protection laws make it unlawful to engagein any unfair or deceptive practice,” he says, liability casescan be easy to develop. “A lawsuit could claim that a compa-ny failed to inform the customer about something, and that ifthey had known that, the product would have been worthless,” says Parsigian. “It may then be determined that itwould have only been $10 or $20 less, but when that’s multi-plied by, say 500,000 people or 2.5 million people, that makesit a big exposure to your company.” And with lawyers typi-cally charging a third of settlement value, he adds, “theymake a lot of money even when the claim is small.”

Be Specific

To be adequately protected against this and other types ofliability initiatives, tech companies need to be specific aboutwhat their products can and cannot do, whether they serveconsumers, business-to-business or both.

In the life sciences, FDA requirements typicallyensure that this happens for manufacturers by sanction-ing a narrow range of product uses. If end users—who areoften medical doctors, surgeons or similarly trained pro-fessionals—choose on their own to use the product inways other than those for which it was intended (knownas “off-label” use), the company is generally protectedagainst liability issues. Non-regulated companies, howev-er, should work toward implementing similarly strongsafeguards on their own.

For example, says Macenka, “it’s important that yourlicense or purchase and sale agreements as well as yourdistribution and reseller agreements all be looked at withan eye to what your business is actually doing. This meanslooking at exactly what your product is and how you’reselling, distributing and supporting it, as well as who isultimately going to use it and how they are going to use it.It isn’t necessarily the case that one size fits all.” The boil-erplate approach, he says, only deprives companies ofanother level of protection.

“Companies that sell through distributors or resellersin other parts of the country or world, for example, need to

12 big ideas

Tech businesses need to be aware ofother areas of exposure—

promotional information, licensing, insurance….

address in the contract how the liability flows (or doesn’tflow) between the company and its distributors,” saysMacenka. “There may be warranty exclusions and liabilitylimitations that should be included in all of these agree-ments along the way.” Further customization may be neces-sary if a product is to be used in a high-risk environment.“This situation could require additional language thatmight further reduce the company’s liability for use of theproduct in a situation or under conditions for which it wasnot designed,” he adds. “A good agreement will cover aspectrum of issues.”

This remains true in situations where risk levels areunknown, such as when a company enters a new area oroffers a new service. “In one example, a software compa-ny recently introduced a clinical record product for elec-tronic medical records,” says Larry Wittenberg, a co-chair of Goodwin Procter’s Life Sciences Practice. “Withthis introduction, there was heightened concern aboutproduct liability. If a record is recorded improperly, forexample, or if it does not get recorded or is misfiled andgets lost in the shuffle,” he notes, “there is the concernthat a patient may suffer.” To guard against potential lia-bility issues, the company “enhanced its quality controland focused on potential problems,” Wittenberg adds,“and made sure that their insurance would cover thosepotential problems.”

Insurance is another area that should receive the samelevel of attention and care as the others when protectingagainst product liability. “You’re putting the company atgrave risk if you’re starting commercial activities and you

don’t have the right type of insurance,” says Macenka. Herefers not only to the general liability insurance thatevery business should have, “but also insurance that cov-ers what your product does.” Over the years, many litiga-tors have learned the hard way, he says, about “how theywish insurance policies had been written.” This has, inturn, led many of them to become “business lawyers in asense,” according to Macenka, when they are able toreview insurance policies at the time the policies are beingput into place and help craft the right policy for a client.

When conducting a risk-management assessment, forexample, the litigator will review a company’s insurancecoverage with the objective of learning specifically how itwill help the client if it’s needed in a liability case. Macenkasays the effort pays off not only if a case arises, but alsowhen insurance companies are willing to work with a cus-tomer on specific aspects of coverage. “Sometimes you canask for new policy terms that are favorable to the client,”he says. “This won’t necessarily get you a cheaper policy,but it can get you one that provides better coverage if youever have to use it.”

This fits nicely into what Parsigian says is the best wayto view the many steps needed to protect a companyagainst product liability: the ounce-of-prevention perspec-tive. “When you’re thinking about prevention,” he says,“you may never see the upfront value.” But if one actionout of 10 prevents a problem, “you’ve still saved a fortune.A lot of this stuff is preventable,” he concludes. “And if itisn’t prevented, it’s because the company didn’t take theright kind of precaution.”

big ideas 13

Not every product recall

results in a product liability

lawsuit, but many have the

potential. The following list

shows only tech-related prod-

uct recalls posted on the

Consumer Product Safety

Commission website for

August and September 2008,

providing a sense of the size

of this exposure over a short

period.

Product Recalls:Liability in Waiting

PRODUCT HAZARD

Gas boilers Carbon monoxide leak

Remote-controlled helicopter toys Overheating battery

Scuba regulators Retainer failure

Laptop computers Wire-related fire hazard

Cordless screwdrivers Overheating battery

Countertop water dispensers Defective heating element can discharge molten metal

Polariscopes (laboratory instrument) Missing wire can cause shock

Air conditioner/heat pump Overheating can cause fire

Charging unit for auto spotlights Overheating can cause fire

Light modules Circuit boards can cause fire

Heat-recovery ventilators Overheating motor can cause fire

Halogen work lights Overheating can cause fire

Cordless brad nailer Defective safety switch

SOURCE: CONSUMER PRODUCT SAFETY COMMISSION, 2008.

DDid you ever wonder how Nabisco hiton the idea to market Oreos cookiesas a diet choice by putting them in100-calorie packs? That blockbusterconcept was developed not in a foodlab or advertising agency, but in aprivate, online customer communitymanaged by Communispace Corp.With just over 200 employees,Communispace has managed morethan 300 communities on behalf ofbig names like Kraft Foods (whichincludes Nabisco), Best Buy, CDW,Hewlett-Packard and Sprint Nextel.Communispace recruits communitymembers, manages the technologyand facilitates the discussions, whilea staff of social scientists studies theperformance of social networks.Communities of mothers, physicians,business owners, investors and othershave advised companies on productdesign, marketing and strategy.CEO Diane Hessan co-founded thecompany in 1999 hoping to build“learning communities” of internalemployees, but shifted the focus tocustomers on the suggestion of aclient, Hallmark. That was the con-cept that took off. “If people thinkyou’re really listening to them, it’sjust unbelievable what they’ll tellyou,” Hessan says.

—Richard Sine

How are your online communities different from a focus group?

A focus group is 10 people sitting in a room for an hour or two. Once that hourends, there’s no way to continue the conversation. If you have more questions,you have to recruit again. Using the Web, we put 300 or 400 people in a room,figuratively, all the time.

But how do you keep them going back to that “room”? Traditional customer service surveys have such low participation rates.That’s our “secret sauce.” When people first think about building a community,they have a thousand questions about the technology. We’re proud of our technol-ogy, but the people running the community have to understand how to get normalpeople to come online and open up. A lot is related to how people are treated.

When people feel connected to others in the group, they’re more likely tokeep coming back. The Holy Grail of online communities is what we call “highengagement,” where people are really honest and can build on each other’s ideas.Clients who have access to this highly engaged room of customers can ask ques-tions, they can receive unsolicited advice, or they can just “sit in a corner” andlisten in on conversations. Sometimes this is where you learn the most abouttheir lives. If they’re bonding, they’re more likely to have conversations thatanswer the questions you forgot to ask.

A lot of online is creating trust. So knowing who everybody is, and not havingsomebody be “yougogirl12” but an actual person, with a picture and profile andeverything, makes a difference.

So many companies are rushing to establish a presence in social medialike Facebook and Second Life. What are they after?Most of the data says that people are spending a lot of money experimenting butnot getting a lot of results. They’re building expensive sites in Second Life andno one’s coming, or they’re creating an electronic bulletin board and not much ishappening. The people at Forrester, the analyst firm, believe that social mediacan have many different purposes: creating buzz, facilitating product support,and so on. They have five categories: listening, talking, energizing, supportingand embracing. We play in listening and embracing, meaning using your cus-tomers to co-create or innovate. A recent study by TNS, the marketing firm,says that right now, marketing executives think the area of social media that hasthe greatest potential for ROI is in using it to listen to customers.

What’s the biggest mistake firms make when they venture into socialmedia?People get totally enamored of a technology or a site—they say, “Let’s do some-thing in Facebook!”—before they consider their objectives. I even see that in ourclient base. People say, “Oh, I love this idea of a community! Let’s go!” Then Iask, “How would you use it?” It’s funny how even experienced people will stopand say, “Oh, I guess I ought to figure that out first.” We have a whole upfrontprocess before we launch a community that helps clients think that through.P H O T O B Y F R A N K R A P P

DIANE HESSAN, CEO, COMMUNISPACE CORP.

interview

14 big ideas

“If they’re bonding, they’re more likely to have conversations that answer the questions

you forgot to ask.”

“When people feel connected toothers in the group,” says Hessan(center), “they’re more likely tokeep coming back.” The Holy Grailof online communities, she adds,“is what we call ‘high engagement,’where people are really honest andcan build on each other’s ideas.”

Netbooks, a category ofsmall, low-cost, lightweight subnote-books, are perhaps the next big thingin the computer market. TheseLinux-based laptops are designedexclusively for wireless communica-tion and Internet access but are alsoexpected, in the next few years, toaccess software through the cloud (seepage 18). Industry experts claim thatat least 50 million units will be incirculation by 2010, with models byDell, Acer, Lenovo and othersalready on the market. However,with cell phones becoming more data-centric, and similarly priced in the$300 to $500 range, the questionremains: Will users really need bothdevices?

When the Phase III trial of La JollaPharmaceutical’s new lupus drugfailed to result in FDA approval, thecompany’s stock price plunged to lessthan a dollar a share. But after 16years spent developing what waswidely considered an important drugfor reducing renal flares—a commonand debilitating occurrence for lupuspatients—company leaders weredetermined not to give up.

The then-CEO persuaded venturecapitalists to invest $66 million in LaJolla Pharmaceutical and thenstepped aside to make room for exec-utives with clinical trial experience. InMarch 2006, Dr. Deirdre Y. Gillespietook over as CEO, and a new chiefmedical officer was hired a fewmonths later.

Dr. Gillespie brought drug devel-opment and marketing experiencefrom stints at Novartis as well assmaller biotech companies Vical andOxxon Therapeutics (now OxfordBioMedica). “I had gone to medicalschool with the intention of becomingthe most famous cardiologist inEngland,” Gillespie explains. “Iassumed that I would run blood-pres-sure clinics and help change theworld. But I found that … there wasnot enough variety and I could notmake as big a difference as I wanted.So I got into pharmaceuticals realiz-ing that I could make much biggerchanges in that field.”

Gillespie and her team spent ayear analyzing the data from previous

trials with the FDA. In the initialPhase III study, the new drug did notperform 50 percent better than aplacebo. While the drug did lowerantibodies and reduce renal flares,those taking the placebo also experi-enced fewer flares. “To this day wecannot explain why the placebo groupbehaved so differently than expected,”Gillespie says. “However, the FDA feltthat we had a good drug, which theyfast-tracked, to the point that all weneed is another Phase III study.”

Gillespie’s team designed a newPhase III that began in August of2006. Three times larger than the pre-vious study, it includes about 875patients from 29 countries. The com-pany is testing two doses of the drug.So far the results show that those onhigher doses have lower antibodiesthan in the previous trial, with noadverse effect observed to date. Theplacebo group shows no signs of low-ered antibodies.

1ONE COMPANY’S STORY

tech4techin

side New Perspectives

On character, controversy, and howwe actually see ourselves

Cloud ComputingIs it worry-free?

Green MarketingWhat you can’t say

What's Next?Operating via phone, data accessthrough call centers, printing in 3-D

17

18

19

BY ROBIN MORDFIN

16 big ideas

Gillespie is already looking aheadto 2010, when she hopes that thedrug will finally be approved. SinceLa Jolla has to build commercialcapabilities from scratch, it is seek-ing partners to produce and marketthe drug in Europe and Asia and toco-promote it in the United States.Ultimately, the company—which spe-cializes in drugs for relatively rareconditions—hopes to create its owncommercial development for otherdrugs in their pipeline.

“Once I got into the commercialside of pharmaceuticals,” Gillespiesays, “I realized that was where allthe decisions get made—the decisionsabout what drugs get developed andwhat diseases will be addressed. Icould see the bigger picture and Irealized that, for example, if this druggets approved I will be helping manypeople around the world—a lot morepeople than I would ever have beenable to help on Harley Street.”

Robin Raskin—CEO, Living in Digital Times

“The Voyage of the Narwhal by Andrea Barrett is a fantasticbook about the things you don’t give up—no matter what. Itdescribes a group of very different men on a ship headed forpolar exploration in 1853 and the women they’ve left behind,and provides excellent examples of the ways in which prideand egos can get in the way of something important—likestaying alive—while having a strong character can make almostanything possible.”

Brian McGrath—president, Keller-Heartt Lubricants“Sidney Poitier’s autobiography, The Measure of a Man, pro-vides an unexpected guide to the qualities a person needs tohave in order to achieve in both life and business. AlthoughPoitier grew up in abject poverty in the Bahamas, his fatherraised him in a disciplined and controlled environment witha huge emphasis on integrity—something he believesdirectly contributed to his success.”

Marc A. Jones—partner, Goodwin Procter“In Freakonomics, Steven Levitt and his co-author, StephenDubner, use the analytical tools of economics to come up witha number of controversial conclusions about social and culturalriddles that have vexed social scientists for years. For exam-ple, they assault the hard work parents do to give their chil-dren an academic head start, and conclude that children whoare successfully enrolled in better schools by participating inpublic-school lotteries are statistically no more successful thanthose who enter but lose such lotteries. While many will dis-agree with the authors’ conclusions, the book is thought-provok-ing, well-written, and free of the jargon, charts and graphs that sendmany casual readers running for the hills.”

Carolyn Leighton—founder and chair, Women inTechnology International“An oldie but goodie is Maxwell Maltz’s Psycho-Cybernetics.Maltz, a plastic surgeon, noticed that when he fixed someone’snose, she would look in the mirror and still see herself as shewas before. This led him to research how we see ourselvesand how using visualization can help us succeed. The tech-niques and exercises in the book help you solve problemsand get to the next step, even when you feel you are face-to-facewith a cement wall.”

What I’m Reading

big ideas 17

tech4tech

Purchasing and maintaining softwarecan be time-consuming and expensive,especially for smaller companies thatmust buy many licenses and employ atechnology team to keep systems run-ning. Fortunately, high-speed networksand fast, inexpensive data storage arepushing forward the development ofcloud computing, which may help com-panies cut costs in a big way.

In cloud computing, customers buycomputing power from a provider thathosts the software infrastructureapplications on its own server comput-ers and storage arrays. While manytechnology analysts believe that full-scale cloud computing is a decadeaway, this technology will allow busi-nesses to offload most or all of their ITinfrastructure to third parties.

“Cloud computing is all aboutdelivering applications and services tousers over the network and freeingthose users from needing to worryabout how these applications and ser-vices are managed—they are up there‘in the cloud,” explains Dennis Quan,director of development for the IBMAutonomic Computing Division.“Cloud computing will be the key tothe next generation of the Internet.”

Several major companies have cre-ated consortia to build that next gener-ation. IBM and Google are buildingdata centers to be used by computingstudents to program and researchremotely. Hewlett-Packard, Intel andYahoo are creating six test facilitiesthat will use HP hardware and canaccess up to 4,000 processing coresprovided by Intel. Businesses, univer-sities and government agencies will betesting the software, data managementand hardware.

“The partnership focuses on sup-porting open innovation in cloud com-puting by providing academic, govern-ment and commercial researchers

access to large-scale environments totest their research projects,” says RussDaniels, president and CTO of CloudServices Technology for HP. “The rangeof jobs the cloud can do will expand as aresult of these breakthroughs, improv-ing its abilities to meet a broader rangeof customer needs.”

The cloud’s expansion, however,faces an obstacle: limited bandwidth.Many IT experts worry that thealready strained systems will not beable to cope with the growing amounts

of data that will be sent back and forthin a cloud computing setting.

“There is no doubt that the role ofthe cloud depends on the bandwidthneeds for a potential use,” Danielssays. “Designers have to think end toend—the quality of connectivity fromthe devices through the back-end sys-tems, and the required data’s location,scale and rate of change all requirecareful consideration.”

The bandwidth requirements maybe less than anticipated, Quan says.“It’s worth distinguishing between rela-tively bandwidth-intensive video appli-cations and relatively bandwidth-unin-tensive Web browser-based applica-tions. The majority of cloud applicationsare likely to be examples of the latter.”

CLOUDY DAYS—AND LOWER COSTS

Turning theSword on Pirates“We’re glad you’ve been enjoying oursoftware—but you neglected to payus. Our lawyers tell us we can sue,but we’d rather make you a customer.When can we expect payment?”

More unauthorized users arefielding calls like this from softwarecompanies that have installed so-called automatic software auditingfeatures into their products. Theauditor is a piece of implanted codethat collects usage information andcommunicates it to the softwaremaker’s mainframe via the Internet.

Automatic auditors are provingto be a great alternative to more tra-ditional copyright protection strate-gies, says Goodwin Procter IPLitigation partner David Goldstone.They’re also valuable for productmarketers and designers becausethey can detect which features aremost popular with customers. Butcareless use of auditors can leavesoftware makers open to claims ofprivacy invasion. “If a softwarecompany accesses data on a user’smachine without authorization, thatcan be a federal crime,” he says.

Companies that adhere to pri-vacy laws and regulations can stillaggressively pursue unauthorizedusers using automatic auditors. Forexample, Goldstone—who studiedcomputer science at the Massa-chusetts Institute of Technology andprosecuted software pirates andcomputer hackers at the Departmentof Justice—files for subpoenas thatforce Internet service providers toquickly identify the IP addresses ofunauthorized users.

“What amazes the software com-panies is how much money is outthere,” says Goldstone. “Companiesthat didn’t know they had a piracyproblem have been recouping hun-dreds of thousands, even millions ofdollars a year.” —Richard SineCH

ARTB

YALE

XREA

RDON

18 big ideas

Background. In television, printand Internet media alike, there hasbeen a recent surge in environmen-tal marketing—advertising thathighlights the environmentally bene-ficial characteristics of all types ofconsumer products. Through envi-ronmental marketing, producersseek to capitalize on increased con-sumer awareness of and demand forenvironmentally friendly manufac-turing practices and products,including those, for example, that donot contain dangerous or persistentchemicals, waste energy or othernatural resources, or contribute toclimate change.

Awareness. Any environmental mar-keting strategy must dovetail with theoverlapping array of federal and statelaws that governs environmental mar-keting claims. At the federal level, theFederal Trade Commission has issueda set of guidelines specifically target-ed to environmental marketingclaims, called “The Green Guides.”The FTC is currently updating theguides to better address currentclaims, such as those related to car-bon offsets and green buildings. Somestates also have their own environ-mental marketing statutes that aresometimes more stringent than TheGreen Guides.

Action Steps. Knowledge of federalguidelines and state standards is essen-tial not only to avoid potential litigationand enforcement actions, but also toensure that any claims ultimatelyenhance rather than undermine a com-pany’s image and products. There aresignificant opportunities for businessesto develop goodwill and differentiatethemselves from competitors throughmarketing—if they understand therequirements for making and substan-tiating their environmental claims.—excerpted from Goodwin Procter’sEnvironmental & Energy Advisory,September 18, 2008; www.goodwinprocter.com/publications.aspx.

On My Radar ScreenT H E P R E D I C T I O N S

House Calls“Today we have a fusion of telepres-ence and clinical information technol-ogy that enables medicine to be effec-tively practiced at a distance. Thisbegan with radiologic records thatwere digitized and sent around theworld in seconds. Today so manymedical records can be digitized thatthe Army is monitoring critically illpatients in Guam from Honolulu.Through robotic surgery a surgeon

can be in the next roomor thousands of

miles away. InCanada MYCA isbuilding a plat-form for primary

care physicians topractice through lap-

tops and cell phones thatcan be paid for on a subscriptionbasis.” —Goldsmith

Easy as Pie“Call center tech-nology is about tochange in a way thatwill really enhance cus-tomer service. Today, when you call abank, you receive voice prompts andrespond by speaking or typing intoyour handset. With today’s 3Gphones, technology is being developedthat will allow graphics, videos andstylus communication to take place onyour handset while you’re on thephone. So while you may verbally askto see how your assets are allocated,rather than hearing a list of dollaramounts, you will see a pie chart of allyour accounts with which you caninteract.”—Yuschik

Coming to Life“Three-dimensional printers—whichcreate physical objects by layingdown thin layers of plastic followingthe code inputted from a computer-

aided drafting document—used tocost hundreds of thousands of dollars.Now that they are coming down inprice, more companies will find waysto use them. For example, an Internetcompany calledFigureprints willmake a 3-D copy ofyour avatar fromWorld of Warcraftby pulling yourcodes for $130.These printers aregoing to expand the possi-bilities for collaboration.” —Rogers

T H E E X P E R T S

Health industry forecaster JeffGoldsmith is president of HealthFutures Inc. Matt Yuschik, Ph.D., ishuman factors specialist at ConvergysCorporation. Michael Rogers, whowrites the MSNBC column “PracticalFuturist,” is the New York TimesCompany’s futurist-in-residence.

E M E R G I N G L E G A L I S S U E SMaking the Case for Green Marketing Claims

ILLUS

TRAT

IONS

BYRO

BERT

PIZZ

O

big ideas 19

a look backa look back©

IMAG

EBYP

ERMI

SSIO

NOF

CSBC

LTD

WWW.

CARB

OLIC

SMOK

EBAL

L.COM

,INS

ET:C

OURT

ESYO

FTHE

NATIO

NALL

IBRA

RYOF

SCOT

LAND

20 big ideas

Long before the finger in the chili, the lead in thepaint or the fire in the laptop, there was the infa-mous Paisley snail in the bottle. One summer dayin 1928, a poor Scottish shopwoman named MayDonoghue let her friend buy her an ice creamsoda at a café in the town of Paisley. As she wasfinishing her treat, a partly decomposed snailplopped out of her frosted ginger beer bottle.Donoghue claimed she suffered from shock andgastroenteritis as a result. The café owner insist-ed that he did not owe Donoghue a “duty ofcare” because she had not bought the bottle her-self. Undeterred, pioneering attorney WalterLeechman took the unprecedented step of suingthe ginger beer manufacturer.

The case went all the way to the House ofLords—Scotland’s Supreme Court—where LordAtkin proposed a new legal principle based on theChristian principle of loving thy neighbor: “Therule that you are to love your neighbor becomesin law you must not injure your neighbor…Who,then, in law, is my neighbor? The answer seemsto be—persons who are so closely and directlyaffected by my act that I might reasonably tohave them in contemplation when I am directingmy mind to the acts or omissions which arecalled in question.” Mrs. Donoghue won 200pounds in compensation, and Lord Atkin’s princi-ple became foundational to the modern tort ofnegligence. –Richard Sine

Justice Rides ona Snail’s Tail