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Mark Grossman

Negotiating Tech Deals

20 June 2002

Tech-related deals sometimes lead to disputes just like any other type of agreement. It might be a software development deal gone sour, an outsourcing deal straight from hell or whatever, but things go wrong. When they do, lawsuits often follow. This is your "how to" on negotiating your way out of a major dispute involving technology.

Let's start with the end and work our way forward. I'm often asked why is that disputes tend to settle only as the trial approaches. It turns out to be a complex question that defies a simple answer.

Part of it is that the parties use the discovery process (things like depositions and subpoenas) to learn about the other's strength and weaknesses. This takes time and delays the time when the parties are ready to talk.

Another issue is the purely emotional side. A lawsuit is essentially "civilized" society's way of handling warfare between its members. (I put "civilized" in quotes because having participated in hundreds of hearings, I've watched many a lawyer act in a way that defies my definition of civilized.) Lawsuits are ritualized, expensive and complex, and sometimes I think not an improvement over trial by ordeal. Part of the ceremony is that people yearn to vent before they want to talk. It's all too human.

Yet another part of the answer is the lawyers. Now, don't get me wrong. Pure litigators are an important part of the legal profession, but so are soldiers. We need them both and they serve a purpose.

Still, you won't find too many soldiers who make great diplomats. It's a different personality type. If you want to negotiate early and seriously, I would suggest to you that the litigator is not the lawyer you want taking the lead.

Life is like that. You go to Midas Muffler and you usually walk away with a muffler. You see a surgeon and you usually walk (or roll) away with stitches. See a litigator and guess what, you're likely to end up involved in a lawsuit.

It's not an evil conspiracy to clog the courts. It's just a mindset. Warriors fight wars. Diplomats negotiate treaties.

If I were the client, I would ask my litigator which lawyer in the firm is the best deal negotiator. Rarely is that someone in the litigation department. I would politely (honey is usually better than vinegar) ask to bring that person in to consult on negotiating a settlement.

If you have a tech dispute, you want the person who is best at doing complex tech deals. Have him evaluate your situation. Then, ask your lawyers to two-track your case. What I'm suggesting with the "two-track" is that you simultaneously litigate and work on negotiating at the same time.

Too often, lawyers handle lawsuits sequentially. The traditional sequence starts with a token effort at resolution. I say token because all too often it consists of a nasty letter that ends with "Please be governed accordingly." In my book, that's not exactly the language of diplomacy.

Then comes the token settlement meeting or worse the quick call, which represents one last effort to settle. Next, somebody declares war. At this point, the lawsuit develops a life of its own.

As the client, you need to try to short-circuit the "life of its own part." Show strength through your litigator, but I strongly suggest a vigorous effort to settle simultaneously.

The strongest objection that people will have to this advice is that by showing a willingness to negotiate early, you're telling the other side that you think your case is weak. It sounds good, but I find that in the fog of litigation (like war), the other side really can't get anything out of your willingness to negotiate. If fact, the ironic part is that they may be just as willing as you are to negotiate, but don't have the skill or strategic sense to know how to make it happen.

When you get them to the negotiating table, you should not expect the process to be easy. After all, you're at war with them. Expect them to vent. And, you should vent too, but let them go first.

In any negotiation, I'm a big advocate for listening early and talking later. Remember that in the first hours of your negotiation, it's more important for you to know their position. You'll tell them yours in good time. Be a good listener, be willing to compromise (although you feel that you shouldn't have to compromise) and you may just find your lawsuit behind you. It's usually good business.

Negotiating Tech Deals is republished from
Mark Grossman
Mark Grossman