Copyright, In-House Counsel, Intellectual Property, Legal Ethics, Technology, Trademarks

House Rules: Sometimes The Customer Isn’t Always Right

I work in a highly competitive sales market. Underhanded deeds, though never perpetrated by my clients, are de rigeur in this field. There seems to be an ethical handbook for sales folks that has a theme of “ethics smethics –- close the deal at all costs.”

At quarter-end, or worse, year-end, this mantra can infect an attorney’s most rigid values. It is at these times when we must be on guard against the pressure to close. The pot at the end of the rainbow will look rather less shiny when tarnished by an ethics violation. None of this is news to most in-house folks.

With an economy on a slow crawl back to health, and internal pressures from all sides to cut costs and maximize revenue, shenanigans from sales people are rife in war story lore. But what of bad behavior by customers? I can tell you that after my years in-house, when I thought I’d already seen it all in private practice, I was quite wrong….

Since coming in-house, I have encountered almost every fraudulent scam possible. When it comes to stealing; intellectual property, supplies, or actual equipment, it seems like the fraudsters just sit at home with their Cheetos and think up new ways to rip us off. I am not talking about simple fraud, like a woman who is already in default to a corporation to the tune of several hundred thousand dollars, and uses her husband’s name to obtain financing to rip off a company for hundreds of thousands more. Nor am I thinking of a man who ordered tens of thousands in supplies, only to ship them (and himself) out of the country, in order to be sold on the black market. The supplies, not the man, though I suppose that could make for a better story. Finally, I am not considering the seemingly endless train of stolen equipment that is baldly available on eBay or other web sites.

What I am thinking of are scams that bleed a company to the tune of millions of dollars because the entity is simply so large, that it takes hundreds of hours of research to even begin to know how to stanch the bleeding, let alone attempt to collect from people who will be long gone by the time a complaint, or arrest warrant can be drawn up.

And some of these scams may not be scams at all. Think of intellectual property theft. How many folks reading this column are using out of license software to access the internet? How many law firms have out of date software licenses? When a company grows so large that it cannot possibly control every aspect of its business without losing some inventory to shrinkage (no, not that kind), it behooves inside counsel to strategize ways to at least keep the market place aware that there may indeed be a time that a hammer could fall.

I believe that Microsoft does this very effectively by selecting a particular region or market, and aggressively pursuing smaller offenders for violations of its IP rights. Once the word begins to spread that Microsoft is coming after folks, I presume that there is a chilling period of IP piracy. Full disclosure, I don’t know the above to be an absolutely accurate portrayal of Microsoft strategy, but I do have personal knowledge of tactics like those described above being quite effective. And it can be the same with any company who has inventory to lose.

If your company suffers IP piracy, or even outright theft, it is quite possible to make at least a dent in the damage. Utilizing a strategy like that described above can not only bring a particular region or market into a chilling period; it can also generate revenue for the company. Catching IP pirates and forcing settlements in order to bring them into compliance, is a surefire way to get the attention of your GC. And revenue generating attention for your department is a very good thing. Another strategy to consider is to go after people who are selling your product in violation of your trademarks, or misrepresenting themselves as reps of your company. Simple sting operations can shut down many of these marketers, and with the assistance of your corporate security department, some can even end up in jail.

It is quite easy to get caught up in the passionate cry of “sell baby sell” and overlooking areas such as fraud or theft prevention. In fact, it’s unusual in smaller law departments that there even exists the time necessary to pay proper attention to those issues. But, as difficult as it may be, it is imperative that you make an attempt to focus some of your energies toward protecting your company, and not just in the arena of Indemnity.

After two federal clerkships and several years as a litigator in law firms, David Mowry is happily ensconced as an in-house lawyer at a major technology company. He specializes in commercial leasing transactions, only sometimes misses litigation, and never regrets leaving firm life. You can reach him by email at

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