grellas

In launching a venture, use a good lawyer to help you define what is the best legal structure for your venture, who owns what piece of that venture and on what earn-out terms, if any, who has rights to any IP developed by participants in that venture, and who has what authority to run things, either as owners controlling the ultimate management of a company or as directors/officers having strategic or operational control over how things are done. And do all this with tax, securities law, and other legal bounds in mind.

Are there hazards to founders as they roll along in the earliest stages without the benefit of lawyer review or guidance? Of course. And those hazards lie precisely in failing to understand what needs to be done or in how to do it.

But lawyers cost money and every founder is or should be cognizant of the need to budget wisely for such costs.

So there is room for good DIY guides and services. Indeed, in today's era, DIY guides and services are great and can be valuable: one of the great distinctives of our modern startup era lies precisely in having savvy and informed founders (except for serial entrepreneurs, this was a relative rarity at or before the bubble era). So, yes, by all means, do educate yourself and do use lawyers wisely so as not to overpay or overdo the legal pieces that are secondary (albeit important) to your venture. I encourage what the author is doing here and hope it lives up to its promise.

That said, I don't believe a DIY guide should include arbitrary rules or procedures.

In particular, I disagree that a founders' agreement is an essential first step on the path toward startup launch. In 30 years of specializing in this stuff, I have seen such agreements in very few startups. They can be helpful but there are no arbitrary rules about the need to use them.

A founders' agreement is after all a formal legal document. It locks in relationships and commitments - meaning, if you agree to its terms, your failure to conform to such roles and commitments can have legal consequences. And, while that can be fine, and while it can certainly go a long ways towards limiting the hazards mentioned above that a lawyer would normally deal with, it can also be frustrating for founders to front-load legal things at a time when the venture is in greatest flux. In many cases, you can wind up trying to define in the abstract, and hence lock in, roles and relationships that are by definition still not settled.

As always, the goal is to use good judgment and common sense while educating yourself to the maximum extent possible either through DIY guides/resources or with the help of lawyers. But do not think that there is only one process for getting to the goal of a good launch. If a founders' agreement fits your needs (and if the author offers a good one), by all means use it to your benefit. If not, don't get stymied by the thought that you have failed to meet some pre-condition to launch that really does not exist.

The Copyright Act is a federal statute that protects any public performance of a copyrighted work from infringing uses.

Aereo took what were undisputedly public performances of works from broadcasters to the public, intercepted them, and by a feat of what amounted to technological legerdemain turned them into what it argued were no longer public performances but, instead, individualized transmissions from its service to each of its end users as an audience of one.

In this case, the Supreme Court rejected that argument, relying heavily on the idea that it was merely interpreting a statute (the Copyright Act) that had been amended by Congress in 1976 in part to overturn a couple of Supreme Court cases that had interpreted the prior Act to permit cable-TV style transmissions of copyrighted material free of copyright restrictions. The Court held that, in doing so, Congress intended to bring cable-like services such as Aereo into the Act's sweep regardless of the particular technological ways in which it handled the copyrighted material as it re-transmitted it to its users. Treating such technology, in effect, like a black box, the Court emphasized that, regardless of its innards, this service appeared to all concerned - to broadcasters, to viewers, etc. - to be functioning just like a cable service and therefore fell squarely within the Act's coverage as Congress had intended to modify it in making the 1976 amendments.

The most fascinating part of the decision, in my view, was how the Court arrived at this result while simultaneously trying to narrow its impact so that modern technological innovations would not be hit by its shrapnel. The Court not only did so but did so emphatically. Indeed, it devoted an entire section IV (pages 15-17) of its opinion to that issue. "We agree", said the Court, "that Congress, while intending the Transmit Clause to apply broadly to cable companies and their equivalents [i.e., Aereo], did not intend to discourage or control the emergence or use of different kinds of technologies." The Court then goes on to suggest (without deciding) a number of potentially key distinctions by which things such as, e.g., cloud music services might not in any way be infringing, including the prospect of fair use or the fact that the user receiving a transmission from the service may already own the copyrighted works being transmitted. I believe this is a strong signal from the Court that lower courts are not to ham-handedly interpret copyright law to stifle innovation but are to apply it carefully to prevent its abuse.

All in all, this decision represents a guarded upholding of traditional IP protections that prevents the use of technology to enable free-wheeling use of broadcasted materials while at the same time limiting its holding to that narrow sphere. Given the technical wording of the Act, it could just as easily have gone the other way and upheld the Aereo service as nothing more than something that facilitates individual, "private" performances via a streaming technology. But that would certainly have glorified form over substance and, I think, the Court got it right in the end.

One of the horrid things about law is how it can be dissembled by those whose job is to practice it. This drives people crazy. They know something is real. Yet, especially if they are caught in its hooks, they watch how law can be applied such that results are absurdly divorced from the reality they know. Our advocacy process has many fine elements and yet this is one of its tragic by-products: having the best and the brightest in the field become instruments in trying to obtain cynically-motivated decisions that further some narrow (usually economic) interest at the expense of truth and justice.

That has been happening for a long time now in the patent field as armies of very bright lawyers have found clever ways to concoct patents out of what really should be unpatentable ideas through the art of clever drafting.

Well, this decision gives top-down guidance to judges to cut through such dissimulation in the area of patents and to look at the reality by asking, in effect, "is this really inventive or is it simply a product of the draftsman's craft parading as being somehow inventive." That is the right question to ask in such cases and it should go a long way towards reining in some of the more absurd abuses of recent times.

The case in nonetheless only an incremental step building on solid precedent (as well-assessed by rayiner) and not a radical shift by the Court.

Many had hoped, for example, that this case could be used as a means of delivering a death-blow to all software patents on the grounds that they could all be labeled nothing more than basic mathematical algorithms that happen to apply to a computer. Yet, in its decision, the Court not only did not address this sort of argument but it also carefully emphasized the idea that it was to "tread carefully" in how it might choose to exclude even fundamental "building blocks of human ingenuity" (i.e., laws of nature, natural phenomena, abstract ideas) from patent eligibility "lest this exclusionary principle . . . swallow up all of patent law." To me, this signifies that the cautious approach signaled in Bilski - that is, that of gradually cutting back on the excesses spawned in the past two decades in the area of patent-eligible subject matter - will continue. So don't hold your breath awaiting any court-driven abolition of software patents generally. That will have to await a legislative solution, if it is to come about at all.

This piece - beautifully written - reminds me of an old PBS documentary I once saw about how a savory-looking new food offering got flattened and homogenized into something really unappealing as it went through the fast-food commercialization process. So too with words as they populate modern dictionaries with trite and sterile definitions in tow.

A word does not stand still. It can mean one thing in one era and something related but different in another. It can mean one thing in one place and another in a different place where people came to use it differently. It can have a literal meaning, constituting some tangible thing. That meaning can then be applied by analogy or metaphorical usage to some intangible attribute. As it is ported from one time or place to another, it can continue vibrant in its home tongue or it can die and be absorbed by another tongue. Or it can continue in its original tongue, die in its original meaning, and continue vibrant in other meanings. Caesar's ferre or latus (same word, different forms) could mean "to bear" (as in bear a load) or "to bring" in his day and can today have spawned such words as rich and varied as "superlative" (connoting borne or carried above) and "circumference" (connoting "brought around") (see my write-up on this here: http://www.grellas.com/article_word_origins_fero.html). Wycliffe's "knave", or "young boy" as it meant to him in the 14th century, is today a far more sinister character than originally meant. Sinister itself derives from the Latin, meaning left-handed. And so on and so on, almost literally ad infinitum.

So how does the compiler of a language go about capturing what it all means when putting together a dictionary? First, by deciding to be either prescriptive (stating how words ought to be used) or descriptive (stating simply how words are used). Second, by deciding how much to bring in of the historic origin or etymology of a word. Third, by deciding how much to illustrate its usage with examples from existing literature. And, of course, by deciding how to formulate the meaning or the various meanings of the word as used in then-current usage or at times in historic usage (anachronistic words).

As pointed out in this piece, modern dictionaries tend to do this task superficially, by committee. They are serviceable. They are helpful. The are easily accessible. Thus, they have utility. But they rarely go beneath the surface of a word's meaning and, in so limiting themselves, even leave the false impression that words mean only what the flattened, homogenized, "fast-food" version says they mean - that is, something not very interesting. As the author of this piece points out, when a dictionary is so done by committee, it misses much of what is valuable in words.

But there is a reason too for the fast-food character of the modern dictionary and that is that people have limited ability or patience to want to dive into the deeper or subtler meanings of words. That takes hard work and, while a joy to the one coming at it from a specialty angle, is off-putting to many modern readers or even writers. People want something fast and to the point, without too much nuance.

For those who value the joy of words, and who seek to write with some measure of nuance and precision, there is (for English) the old Webster's (as noted by the author), there is Samuel Johnson, and of course there is the OED (a stupendous achievement with huge emphasis on word origins, illustrative usage, and subtle shades of meaning). There are also major (and very thick) Latin and Greek dictionaries that go deeper into many of the words from which the English words were derived. So too are there medieval dictionaries capturing the English of Chaucer and Wycliffe, as well as dictionaries of Old English, which bring out the Germanic origins of many of the words that predated a good number of those we use today. But of course this brings us back to the point that massive complexity this way lies. Word meanings can have a priceless fascination just because their study can take you into many times and many eras and many languages. For those inclined to dive deeply, and to work hard in seeking to excel in expressing themselves, the resources are there for the taking. Just don't expect an easy path.

The author of this piece does a splendid job of suggesting the joy of words as one uses a solid dictionary to help bring them to life. This is an excellent read and one to be highly recommended. The rest (the hard work) is up to you.

Disappointing as this result is for those who want IP law to adapt more cleanly to developer realities, and much as I loved Judge Alsup's decision in the lower court (https://news.ycombinator.com/item?id=4051761), this is certainly not some badly reasoned decision by this particular 3-judge panel of the Ninth Circuit.

What the panel essentially did was continue to apply Ninth Circuit law as it has existed since the 1989 Johnson Controls case holding that the sequence, structure, and organization (so-called "SSO") of a computer program may be entitled to copyright protection depending on the facts of a case. Judge Alsup had not disregarded this precedent but had found what in my view were superb ways of treating APIs in particular in a special way that rendered the copying of their SSO non-infringing - to wit, acknowledging that developing an API was even highly creative, a structure of this type, functioning as a method for compatibility only, should not in itself be protected by copyright but should be protected, if at all, only if it rose to the level of warranting patent protection. How he got there was somewhat complex given that this is a complex area of law. But that is where he had landed. The result, as a matter of policy, was very clean for developers: it gave the courts a workable roadmap for moving the copyright analysis into conformity with the modern digital age on the critical area of APIs and inter-operability without the need of having Congress address the issues.

This panel did the exact opposite. It held that, when it comes to the subject matter of copyright, if a form of expression meets the threshold of being "original," that is enough to make it copyrightable no matter what its function. If the developer of an API had to make creative choices in deciding how to set up the SSO of the API (and almost certainly he will), then the API is protectible and any attempt to copy the same SSO is infringing on its face, subject only to fair use and similar defenses. In so holding, this panel vigorously reasserted the Johnson Controls precedent that has hung over SSO analysis in the Ninth Circuit for many years - meaning, in the case of APIs, it is for a jury to determine case-by-case whether any particular SSO is protectible by copyright. The panel here by no means disregarded the concerns and issues raised by Google (and highlighted in Judge Alsup's decision) but it relegated them to being a potential defense under fair use analysis for acts that are otherwise presumptively infringing. The result: stronger IP protection for APIs and a wealth of uncertainty created for developers in trying to work with inter-operability issues in our modern age.

This case sparked intense interest and drew upon many top lawyers on both sides to argue the issues. It is by no means some hack result. Indeed, it could be argued to be far more in line with Ninth Circuit precedents than Judge Alsup's decision. It can be appealed further, possibly to the full Ninth Circuit complement of judges and possibly to the Supreme Court, and who knows whether it will be upheld or not.

But the really sad thing is the missed opportunity. This was a chance to bring clarity and order to an otherwise muddled area of law and this panel, rightly or not, chose to go back to the muddle. Should it ultimately be upheld, the only real solution in light of this is for Congress to amend the Copyright Act to do a carve-out for APIs to enable them to get special handling under the law to facilitate inter-operability.

Non-compete clauses have their place in the law but they have in my view been abused in the employment context.

The classic case of a good reason for having an enforceable non-compete arises with the sale of goodwill in a business. Proprietor X sells his business for $10M and then sets up shop next door to steal the customers of the business back to his new, competing one. In effect, this is a case of theft. Someone pays value for the goodwill value of your business and that means (usually) mostly for the revenues resulting from continued business from its existing customer base. If you take that value for that asset, it is deemed unfair under law that you should be able to grab the asset back through immediate competition for that same customer base. Buyers are savvy enough to know this and therefore require that you enter into a non-compete clause as part of the sale. And the law says, "yes, indeed, this is a restraint of trade in that it limits what the seller can do in pursuit of his trade or business following the sale but it is a reasonable restraint of trade, and hence enforceable, because it protects the value of the goodwill interest bought by the buyer for which good value was paid." Even in enforcing such clauses, the law says that they are enforceable only to the extent they are reasonably necessary to fulfill the legitimate purpose the law seeks to protect. In the sale-of-business context, then, non-compete clauses are enforceable insofar as they are limited in scope (that is, in duration and in geographical reach) in a way that the law regards as reasonable.

The problem with non-compete clauses in the employment context is that they are almost inherently unreasonable in their application. I join company X as a developer. I leave my employment after two years and I want to pursue my livelihood in the same line of business that company X engaged in, albeit not using any of its confidential proprietary technology. Yet, even though I would respect its trade secrets and not do anything the law would regard as being innately some form of unfair competition, the non-compete clause imposes an absolute bar prohibiting me from pursuing my livelihood in my very area of strength for as long as it remains in effect. This can cost me money. It can cost me opportunities. It can represent a setback to my ability to continue to develop skill levels in areas that are important for my future. All this for what? I get nothing whatever for it. Unlike the seller who just walked away with a pile of cash for selling his goodwill interest, I am not paid for being burdened with this restraint. I am simply stuck with it, to my great cost. And what is the justification for this? Again, unlike the sale-of-goodwill context, an employer does not have some right to keep competitors out of his space. All kinds of people can compete with him. What he can do, via the non-compete, is arbitrarily keep me as a former employee out of his space. Why should he have that right? Well, there is no particularly good reason except insofar as my competing with him may allow me to misuse confidential proprietary information that I got from my former employment with him. Everything else is arbitrary. Of course, even states that give maximum enforcement to such non-compete clauses will require that they be limited in duration. But two years (or whatever) is two years and this does not make it more fair to the former employee.

California refuses to enforce non-compete clauses in the employment context except to the extent necessary to protect confidential proprietary information. It has long done so and this has not stopped major employers from thriving with their tech companies in this state. Even companies that are located elsewhere have always been required to abide by these rules with respect to their employees who actually work in California. They have adapted over the years to the California rules with no serious setbacks to their financial interests.

I believe other states will in time be forced to conform to the California pattern as part of staying competitive in their bids to attract tech workers. I don't know the local situation in Massachusetts but would guess this is a key factor in the governor's decision to push for change.

In any case, this is one area where the idea of reasonableness is important to how the law should be shaped: if there is an awfully good reason why a non-compete clause should be enforced (such as in the sale-of-goodwill context), let the law enforce it to protect legitimate interests; otherwise, it is arbitrary and unreasonable and hence an unenforceable, illegal restraint of trade. This should be the rule everywhere, not just in California.

Think about what it means to the HN culture to have a subject that normally would have been flagged out of existence as overtly political suddenly be featured front and center in the apparent belief that ideological purity is now a litmus test for who can serve on a board of directors in the startup world.

In a free society, people can unite in their business ventures even though they might be far apart in how they view the world generally. Startup culture thirty years ago had a decidedly American flavor. Today, it does not because the world is big and diverse and because entrepreneurs today who do startups come from all sorts of cultures and backgrounds. Surely, those who come from such divergent backgrounds hold differing political and religious views. Some are conservative, others liberal, still others apolitical. Some are theists, others atheists. The variations are many but one thing is certain: not all people think alike on political, religious, or social topics. These are issues that inherently will divide.

What happens, then, when people attempt to set political, social, or religious tests as criteria for who can hold important positions in a business organization? Well, it gets about as ugly as it can get, just as such tests proved ugly when used historically by, say, Christians to exclude Jews from holding important positions in society or to punish atheists for not holding to some prescribed creed.

One might say, "this is different" because we are not holding to an arbitrary creed but rather to fundamental principles that ought to govern all humanity. Well, that is precisely how those who sought to impose thought control in other eras rationalized their conduct. "Are you now or have you ever been a member of the Communist Party" is a question that destroyed many careers as the blacklists proliferated back in the 1950s. That was indeed a repulsive set of events by which many innocent persons were hurt and today our national conscience wishes it could take back the damage done to them.

So why is this any different? It is easy enough to whip oneself up into a lather over Ms. Rice’s policies if one disagrees with them but what about the half of America (or whatever significant percentage) that does not. And why should this be relevant to board service?

Politics, religion, and social worldviews divide people and have no place as limiting tests in a business environment. Scolding and finger-wagging was bad enough coming from a first-grade teacher trying to promote sanctimonious values back in the 1950s. Do we really want a counterpart agenda now setting rules for who can be a founder, who can be an investor, who can be a director, who can be a CEO, or who can otherwise take a prominent role in the startup world? The answer should be an emphatic no.

Principle is more important here than a particular outcome. What happens with Ms. Rice is not the issue here. What matters is upholding the abiding principle (precious in a free society) that people can hold divergent views on such topics as politics, religion, and society without being punished for their views in a business context. People can and ought to be able to unite to form great companies without having to compare notes on how they voted in the last election or some similar matter having nothing whatever to do with whether someone can add value to the venture. This is central to startup culture. Let us not lose sight of something so basic.

Paternalistic meddling with free consumer choices is always fraught with peril.

Sometimes it is necessary to protect important principles in society. You can't discriminate based on race - that limits choice but who would support the contrary? You can't defraud people in selling products - ditto. You can't buy land to build a smokestack plant in a quiet residential neighborhood - ditto. Many other examples might be cited. In all such cases, the law intervenes to limit private choices. And there are few who would not applaud most such limits. Private choice is not the end all and be all of a society.

Yet, in a free society, private choice should be the overwhelming norm and it should require surmounting very large barriers before legal meddling can limit the choices people can make to serve their own best interests.

Unfortunately, in old-line industries, this idea got flipped and, for years, private choice succumbed to whatever a combination of big government, big corporations, and big unions dictated to the public. Back in the day, writers such as John Kenneth Galbraith even used to celebrate the idea of a "new industrial state" in which the old private competition would yield to ever increasing concentrations of power among government, industry, and labor, who would in turn find ways to "cooperate" with one another in ushering in a more enlightened form of carving up markets and their benefits than mere freedom and competition might provide.

Well, the bureaucratic edict in New Jersey is a relic of that old thinking, perhaps perversely and cynically applied to buy off lobbyists and influencers but rationalized nonetheless by the old paternalistic thinking that the consumer is ultimately best served by having his betters making his buying choices for him rather than being allowed to make them for himself.

Other than in this cynical sense, there is no possible way in which this outrage can possibly be characterized as "protecting" the consumer.

Perhaps the main contribution made by the tech revolution since the 1970s is that it ushered in an era of huge freedom in how people managed their private lives. The internet in particular has been a huge liberating force and so young people especially have come to take it for granted that they can freely make all sorts of choices without having to feel burdened or restricted by the heavy hand of the law. Of course, exceptions can and do remain because abuses can pop up in all sorts of ways without any legal restraints. But, that said, the overwhelming presumption today is that, yes, I can do pretty much what I feel is best for me unless there is a very good reason why I should be restricted from doing so.

And that means, if I live in New Jersey, I should be able to find a local Tesla outlet in which I can buy my electric car if I want. The thought that some politician or bureaucrat should be able to dictate serious limits on that choice is repugnant to anyone who thinks that way. And, in my view, rightly so.

Unfortunately, where the old political pull persists, the law can be abused to protect old-line market players under some guise or other that is a mere pretext for guarding them from competitors who might offer something better and wind up dislodging them in a free market. Legal regulation is not to be rejected out of hand, of course. Maybe the old-line taxi services ought not to have their business cherry-picked by new market entrants who do things differently. Maybe there ought to be some limits in an urban context on absolute free space-letting if this creates nuisances or the like. The line can sometimes be tricky to draw and can require careful and fair-minded judgments given the interests at stake. But how often do we have situations where nothing of the kind happens and instead the issues are decided, in essence, by who pays off whom and who has what degree of political or bureaucratic pull that can be used to protect systems and structures that are far inferior to what the new competition might offer.

I believe that, in these sorts of cases, the tech impetus will ultimately prevail and push things toward broader and freer areas of choice for consumers. Even with this rear-guard action in New Jersey, Teslas can be bought direct from the manufacturer just a short distance away or via remote ordering. And tech-inspired sales and distribution methods in this and a broad swath of other fields will mean that those seeking to limit consumer choice by protecting local turf through bureaucratic pull will be fighting what will ultimately prove to be a losing battle. As consumers, we are not bottled up anymore. If we don't like something that is really stupid, we can more and more work around it using other solutions.

And so we can, I think, basically see that what the local commission is trying to do in New Jersey is much more a last gasp for the old ways as opposed to being a harbinger that will limit Tesla (or any similar new-wave competitor) from accomplishing its goals. Tesla is right to oppose and fight it (and presents a compelling argument for its view). But the action stands out as so bizarre precisely because it is so out of step with the tech impetus that rules our day. It will stand legally (courts are loathe to intervene in such matters). But the longer-term political winds are against it, in my view, and it will prove a temporary obstacle at most as the modern tech impetus advances.

As the article points out, "auto safety" itself has had a huge push from consumer advocates at least since Ralph Nader highlighted the risks of car design defects in the 1960s.

That said, a few points about the law and auto safety:

1. U.S. law is tied to individual responsibility for conduct that is wrongful. As the auto industry developed over the past century, that meant that those who sought to drive by what the law declared to be the rules of the road were deemed to have done something wrong only if they failed to meet a reasonable standard of care in driving - that is, if they were negligent, careless, inexcusably inattentive, or otherwise failed to exercise a sufficient degree of caution that they created safety risks to others owing to their manner of driving. Breaking rules (e.g., speeding, driving the wrong way on a one-way street, and like items) constituted one such failure to exercise proper caution. In such cases, the law developed so as to hold such drivers responsible for damages in civil proceedings for the what the law called the "tort" of negligence. A tort is a civil wrong by which the actor committing the tort ("tortfeasor") is responsible to pay in damages for all harm caused by his tortious activity. In layman's terms involving cars, this generally means careless conduct. If the degree of wrongdoing is more egregious than mere carelessness, as for example when teenagers in the 1950s used to drag race through city streets in a way that constituted reckless conduct (that is, conduct by which the wrongdoer deliberately does things that have a high risk of endangering public safety), the consequence of this to the wrongdoer is also a civil wrong for which damages will lie but it is also (usually) defined as a criminal act by which the person can be prosecuted, fined, or jailed as a consequence of such actions. As the intent to harm increases even further, such as an act by which someone deliberately seeks to inflict harm on another while using a car as an instrument of harm, this can constitute a serious crime such as murder (for example, when someone deliberately drives at high speed into a crowd of people and does so with intent to harm or kill others).

2. Underlying the system of law that has developed around accountability for auto-related collisions, fatalities, etc. is a social policy judgment that sees automobiles as a positive good for society. The article notes that such social policy judgments were made over the years more and more in favor of promoting more expansive use of the automobile at the expense of pedestrians and mass transit riders who might also use the roads, especially in urban environments. This undoubtedly happened, though it is a dubious assertion to say that some sort of sinister forces ("Motordom" is the term used in the article) made this happen in some way that somehow overrode the will of ordinary people. I am old enough to remember as a kid how people perceived automobiles in, say, the late 1950s, and there is no doubt from my personal recollection that average people rejoiced and celebrated ever-increasing uses of the high-speed automobile, cheered on the National Highway Act by which old two-lane state roads were sent into relative disuse through the creation of a vast network of interstate freeways, and, as a matter of culture, broadly celebrated what was called the "car culture." Even dissidents of the time, such as Jack Kerouac, though a counter-culture figure of his time, broadly promoted the idea of freedom in driving the open road. If anyone in that era would have suggested that cars be shut down or limited in favor of bikes, they would have been laughed at by the average person. Such ideas were basically considered crank ideas and had no form of popular support whatever. Therefore, it did not take a secret plot by General Motors (or whomever) to get people to push widespread auto use. People wanted to get away from cities generally, wanted to live in the suburbs that were growing rapidly at the time, and wanted the freedom to use cars to get around whenever and wherever they wanted with limited restrictions other than having to obey the rules of the road. Yes, individual cities deployed mass transit with varying degrees of widespread use but these were limited to a few highly localized areas. People generally wanted cars, and mainly cars, to get around.

3. So, coming to the themes of this piece, "auto safety" is one such theme and the idea of the automobile being inherently "murderous" certainly tries to highlight this theme. Yet I would say the broader theme is actually more one of saying that the rules of the road should be rewritten to strike a different social policy judgment about how roads are used. It is nowhere stated in the article, but is strongly implied, that perhaps drivers of automobiles should be subjected to stronger legal consequences than those currently existing in the event they collide with others in using a road. Given that we are here in the realm of social policy, and not existing law, this could mean almost anything. For example, it could mean strict liability for damages if you hit someone using a car, no matter what the circumstances and regardless of what the law now calls "fault." This is what happened to the law in other areas over recent decades, most notably with the expansion of strict product liability law by which manufactures (who at one time could be held liable for injuries resulting from use of their products only if the injured party could show that the manufacturer was negligent or otherwise at "fault" in making the product) had their liabilities dramatically broadened if injuries resulted from use of their products. As the law evolved in that area, the courts and legislatures eventually determined that manufacturers should be held liable regardless of fault if their products could be shown to have inherent "defects" (broadly defined). This led to a huge expansion of liability for manufacturing such products and, for example, pretty much decimated certain industries such as manufacturers of small aircraft. As a matter of social policy, the same could be done with the idea of driving an automobile. Courts and legislatures could determine that it is socially desirable that drivers be held strictly liable regardless of fault because this would promote greater driver safety and would also strike a balance in shared road usage that favors pedestrians and others more than drivers. They could also define as a crime any collision by which a motorist acts carelessly in a way that results in death or injury. They could impose strict penalties, such as losing the right to drive upon the occurrence of even one such event. This sort of change - or any other like it - would have huge social consequences for the vast majority of primarily suburban drivers who do in fact continue to value having the ability to drive freely about as their primary means of transportation. Young people flocking to cities in favor of "upscale urban lifestyles" (and others who have a particular viewpoint, in the case of such young people in favor of mass transit over cars) may see the issue differently. But the law ultimately is driven by the average people who elect politicians, etc. and I would suspect will be slow to change in this respect.

4. The article also expresses concern about high speeds and about drivers themselves being at risk of death or serious injury in driving the so-called murderous machines. While it is true that high speeds clearly enlarge such risks, it is a bit disingenuous to claim this as a primary concern while simultaneously forcing cars to be made smaller and smaller out of concern for increasing car mileage per gallon and promoting environmental goals. In modern public policy making, the same people who try to flog the auto companies for endangering drivers for this or that reason are often the first to decree that cars be made smaller and smaller even though this might create increasing safety risks to drivers who wind up in accidents. Again, this is a matter of social policy, and there are lots of arguments for why smaller cars promote broader social goals, but I rarely hear the people insisting on smaller cars acknowledge that an inherent by-product of this is to increase safety risks in case of collision (perhaps I am wrong on this point but I am going from memory in saying that this is indeed a known consequence of shrinking the car size).

The real battle here is over a strong push to have the law conform to the modern urban trends favoring bike riders, transit riders, and pedestrians over automobiles. That issue should be addressed head on by assessing not only the potential benefits of limiting auto use but also the social costs (which I believe could be substantial). The article does not do that and is flawed because of this, notwithstanding its (many) interesting points made along the way.

A few thoughts:

1. The Supreme Court declined to hear an appeal by Soverain from an adverse ruling by the Federal Circuit Court of Appeals that had determined the Soverain "shopping cart" patent to be invalid on grounds of obviousness.

2. The Federal Circuit's holding by a 3-judge panel had been remarkable and had shocked patent lawyers generally in that the parties before the court had not even raised the issue on appeal as a ground for invalidating the jury's verdict below. The court raised the issue on its own, concluded that the patent was obvious and invalid, and gave judgment for Newegg in spite of the fact that the jury at the trial court level had found that Newegg infringed.

3. This particular patent had been the original shopping cart patent, dating back to 1994 (well before Amazon began) and it had had a formidable history by which its holder had gotten massive licensing fees from major players over many years for the privilege of using online shopping carts on the web.

4. It is easy to say today that everyone knows what the concept of a shopping cart is and that anyone could have come up with the idea of applying that concept to online shopping. That is all well and good but consider this: not only had this patent passed muster as being non-obvious with the USPTO on its original filing but it had also been found to have been non-obvious on two separate patent re-examinations before that same body and by a string of U.S. district court judges before whom the issue had arisen. In other words, Newegg faced a huge challenge on this issue (the legal standard required that it be able to prove that it was obvious by "clear and convincing" evidence, which is often a tough standard to meet) and this is why Amazon and virtually all other major other online retailers had long since caved and agreed to pay royalties for use of the patent. In the patent community, the Soverain patent was seen as rock solid and one whose shopping cart idea was deemed far from obvious. The top judges and lawyers in the nation, not to mention the USPTO, had all so concluded. The chances of upending it seemed slim to none. And, as noted, even the parties themselves had not raised the issue on the key appeal as a ground for potential reversal. Thus, everyone was stunned when the Federal Circuit reversed the judgment against Newegg on that ground, invalidated the patent, and threw the case out.

5. All that said, when Soverain petitioned the Supreme Court for review of the Federal Circuit's decision, it was trying to undo what it perceived as an injustice done to it as a private litigant ("this is so unfair to us and to our valuable patent"). However, from the Supreme Court's point of view, the kind of petition filed by Soverain is to be granted, and a case heard, only when it has significance far beyond whatever impact it might have on any private litigant. The Court's role in hearing such discretionary appeals is to step in and decide important questions of federal law or to determine who is right when the various lower federal appellate courts may have reached conflicting decisions on such points of law in way that cries out of definitive resolution by the highest court. The Court will not hear cases merely because they might have been wrongly decided unless some such extraordinary factor exists. Thus, in denying Soverain's petition, the Court did nothing more than say that this particular petition did not present important issues of the kind that warranted its attention. It did not validate the Federal Circuit's reasoning or analysis. It did not weigh in against patent trolls. It did not add its authority to the fight against frivolous patents. It simply did what it does on over 99% of such discretionary petitions: it used its discretion to deny it. The legal significance of its decision goes no farther than that.

6. Is Soverain a patent troll that deserved this outcome? Well, its CEO had been a law partner at a major law firm (Latham & Watkins) and the company's business was clearly driven by a legal licensing scheme that had little or nothing to do with active business operations or innovation. It had simply acquired the original company that had come up with the patent back in the day. So, it is a troll if you want to call it that or it is not if you want to use some different definition. But this distinction does underscore how difficult it becomes to analyze patent issues simply by placing labels on the parties. The problem with modern software patents is that too many are too easily granted over trivial "innovations" and this has given vast incentives to those who would package them into shakedown licensing ventures and thereby gum things up for true innovators. It is a situation that calls for action by Congress to rein this in. Otherwise, every party trying to defend itself will find itself, as Newegg did, having to go to extraordinary efforts at massive expense to avoid claims of infringement. Very few litigants can do that and, indeed, Newegg is to be commended for fighting this all the way against tough odds. Let us only hope that systemic fixes can help correct the problem so that this is not the only way available for dealing with such patents. Whatever else this system does, it hardly promotes true innovation.

A nice post whose essential point is that you should eschew formulaic methods of writing that force you to fit your thoughts into a rigid format and thus hamper your ability to express them in a way that best suits the subject.

Writing style most definitely ought to be customized for its subject and context.

Some say to write simply. This can be good. You engage your reader. You use active voice. You limit adverbs. You keep sentences short. Nothing wrong at all with this. It works well for many purposes.

Personally, I like to vary the short, direct, and active approach with occasional long, flowing sentences that can add flow to your writing, that can mix polysyllabic words with plain ones, that can use the passive voice as freely as the active when it is appropriate for the task at hand, that can build a succession of thoughts one upon the other in ways that flow naturally for a reader, that can interpose an arresting pause or two to emphasize a particular point - for example, by using hyphens to isolate an illustrative example - and that can bring in parallel elements to help dramatize a point, whether as a matter of form, or of substance, or of any combination of the two.

Whatever your style, the structure of your piece ought to be customized to its content. If it is a simple subject, it can have a simple format (nothing inherently wrong with the 5-paragraph format if it is not used in a formulaic way). If it is complex, then it needs to develop its themes with whatever level of nuance and subtlety may be needed to say something intelligent about the subject.

You need to be yourself in how you express your thoughts. Ever read a standard old-fashioned press release. It almost always begins something like this: "Company X, the world's leading producer of xxx and other market-leading products . . ." Apparently, whoever writes these things has been taught to puff the company right up front to give the release maximum impact. For me, this sort of style has the opposite effect. I read the canned language and I immediately click off and think, "this piece is going to be of very limited value to me, if any." And, just as this is true of such press releases, it is true of any other artificial way that people express themselves in writing. The artificiality may give you a fill-in-the-blanks way of completing your writing task but it works against you with the reader. Readers want to be stimulated in their thinking and, by using custom forms of expression - whether it be by an apt metaphor, a vivid illustration, an engaging story, or whatever - you do them a tremendous service by making what you say interesting. For this purpose, you should put yourself in their shoes and think, "how would I want to have this explained to me to make it interesting."

But being yourself is more than just ranting about a subject. Good writing takes hard work and by that I mean far more than putting time into a particular piece. I mean instead that good writing is the result of a cumulative effort, often spread over a lifetime, by which you read widely about many things, learn how to think, write frequently to develop your skills, gain depth of language skills through significant formal study if you can, and do any of a number of other things that prepare you to meet your reader as a craftsman and not as a hack (used in its non-HN meaning, of course). Yes, this is very hard work. But you will see that it is well worth the effort. You have a lot to say about interesting things. Well, learn to say it well.

Other opinions may vary. This is mine. In general, it also seems to be that of the author of this piece, who put his thoughts well. It is a post worth reading. For anyone interested, I have put together a few additional thoughts on what makes for good legal writing (my particular vocation), which is set forth here: http://www.grellas.com/articles.html.

Non-disparagement clauses can be seen as a throwaway item, a suffocating burden, an essential protection, or a damned nuisance, each according to taste or context.

To begin with, lawyers tend to see these clauses as essential protections and they are sometimes right. But, right or wrong, they tend to insist upon them, especially in the employment context. This explains their prevalence but, of course, does not necessarily justify their use.

Just to illustrate the cases where they truly are an essential protection, you and a competitor have been fighting for years in court over ugly and untrue things that someone has said about you or your company - non-trivial things that have really hurt you. When it comes time to settle that case, a continuing non-disparagement obligation will be not only helpful but essential to the resolution. The same is true in many other legal fights. When emotions have run high, and parties have antipathy toward one another, it is good practice to help ensure the peace after their fight has been settled to require that they not speak badly of one another and to give a simple mechanism such as binding arbitration to help resolve any follow-on dispute over whether they have done so or not. In such cases, there are excellent reasons to bind parties contractually to restraints on their ability to speak where they would normally be free to do so.

The employment context gets trickier because the antecedent acrimony that characterizes a legal fight may well not be present at the time of a termination and the question then arises: why am I being artificially muzzled? And there is a point to this: why be barred from speaking truthfully about a former situation even if it might be negative? why be at risk of a harassing lawsuit over what it means that something "may" reflect "negatively" about someone? why, in an age of easy communication through social media, be made to feel you cannot even speak about something that may have been a major part of your life, perhaps for many years? What may be seen as a throwaway item by some can be felt to be suffocating by others, and all the more so because it is tacked onto a token severance that gives you very little in exchange.

That said, I would say that the overwhelming number of employers and employees alike see these simply as throwaway items. They figure no one will care about such clauses except the lawyers. And, in most cases, they are probably right. The question then becomes whether one should not sign as a matter of principle or whether to just sign and take the money. Most employees take the money.

Of course, employees can push back if they have leverage. No one is obligated by law to sign a separation agreement. If the terms aren't right, and can be made right, then push back. Insist that the token severance be made more substantial. Or that non-disparagement, if it is to be included at all, be made mutual (it can be quite a head-ache for a large employer to keep control of its many people to ensure that none speak badly of you). Or insist that it be narrowed or clarified so as to reduce or eliminate vagueness about what may or may not be deemed disparaging. Or insist that it be coupled with other considerations that give you benefits apart from your normal final pay, etc. This sort of negotiation can make these clauses a big nuisance from the employer standpoint and may cause the employer simply to drop the clause. However, all of this assumes employee leverage, which doesn't often exist in the routine case, and so, as noted above, most employees simply take the money, accept the restriction, and don't bother to look back.

And so it all depends. For the author of this piece, this was a critical issue. For many others, it is not. Context is critical. And for all but trivial cases, do check with a good lawyer to understand the implications of what you are signing. If the risks are real, there is nothing worse that a harassing lawsuit from a former employer angry with you over some statement you made out of emotion. This is what gives these clauses a bad name and it is also what can make them dangerous. In such cases, be cautious about exposing yourself to such risks in exchange for some token severance. It is probably not worth it.

A word about credibility. It comes from the Latin word credo, meaning "I trust." Its value exceeds that of money because it marks you as a person - as someone who is respected, who is trustworthy, and whom you would want to count as a friend. It marks you not as perfect but as special. It makes others ponder not so much that they did the last deal with you but that they would want to do the next deal too. Just as we build credit through many transactions, so we build credibility by the very pattern of our lives. Credit and credibility derive from the same root and signify the same thing: when in doubt, we can trust the one who has either trait. Not blind trust, just a benefit-of-the-doubt level of trust.

Well, pg has earned our trust and deserved the benefit of the doubt when something so off kilter as this is attributed to him. He did not get it here, and that is a sad testament to how crowd-inspired frenzies can bend our perceptions in such faulty ways. Let us only hope that we can learn some good lessons from this.

pg's response is actually priceless: it is like a soft-spoken witness upending a bullying lawyer who had just viciously attacked him, leaving the attacker reeling for all to see. Indeed, the mob looks pretty much like an ass at this point and kudos to pg for his more-than-able defense. Very lawyer-like, in a way, but far more classy.

A few thoughts:

1. Junk patents abound in today's digital world, where "method" and "computer" have been endlessly linked to suggest that something is innovative when it is not. YogaGlo's patent is a bit different but in the same spirit of method madness.

2. For much of this, we can thank the loosening standards imposed over the past two decades by a specialized patent appeals court that has given overblown significance to what once was a highly specialized field of tremendous importance to the competitors immediately involved but not to average people. Result: average people see the flood of junk limiting, irritating, and frustrating their lives and are mad as can be at the skewed results.

3. In a parallel world known as that of the law, it is business as usual, with the junk patents having become monetizing weapons in the hands of aggressors and with the industry generally profiting at every angle from the "growth business" that patent litigation has become. Most of the actors see the insanity but also see nothing at all that is poised to dislodge it because the many tentacles that combine to choke off common sense are so diffused and dispersed, with each having its own reason for failing to act: congressional leaders beholden to lobbying interests, market-leading device-makers seeking to keep competitive advantage by any means possible, those who seek to challenge them having of necessity to spend billions to buy their own arsenal by which to protect themselves, federal circuit judges who have a built-in incentive to magnify the importance of patents and of their role in shaping the "inventions" of the future, a federal system of checks and balances in which a Supreme Court must defer to constitutional restraints on its power to reform the mess it sees before it, a patent office that is overwhelmed with junk applications and simultaneously pressured to move them along in the system without being too finicky about which ones pass or not, and a startup community that is basically schizophrenic on the point in philosophically condemning the system while, in the case of any given venture, embracing it insofar as it gives to the venture a potential sustainable competitive advantage.

4. Seen in this context, the YogaGlo defense is actually as good a technical defense of a junk patent as one might make: it pleads that people try to understand that, as a business matter, the company needs to stake out its turf and block others from intruding on it through the same sort of legal means that all other ventures use and, thus, what should be so wrong in its doing what the whole world is doing anyway; it argues that the thing really is as narrow as one might imagine given that all sorts of non-patentable ways do and always have existed for filming yoga classes; and it claims that the company is really just reasonable and restrained and hardly intending to create the sort of dust-up that followed in the wake of people's shocked realization that they (or people they like) might get sued for doing what used to be a routine filming of an instructional video. Imagine if you were given the awful task of trying to defend this thing. How would you have done it better? From the company's standpoint, this is the baser half of the startup world's schizophrenic attitude toward patents: we may oppose the hell out of it philosophically but, when it comes to pragmatic advantage, stand aside and let us do what we must do to meet our business goals.

5. Of course, in the end, this is really just one more junk patent and so the company's defense comes off as inadequate and even insincere. Yes, others may have made some unfair statements that distorted the facts but the company's problem is that such statements, though perhaps unfair in a narrow sense, perfectly capture the sense that most people have that this grotesque thing should not be allowed to stand and that no tears of sympathy need be wasted on those who brought it into existence, whatever their motives.

Yes, indeed, heartily concur.

"News" is nothing more than a report of events potentially affecting our lives: if a particular report is intelligent, trustworthy, and helpful to our understanding of what we need to do to better our lives, it is something to be valued and even on occasion treasured; if, in contrast, it is nothing more than what amounts to a reporter's trick for grabbing attention or an attempt to pass off what amounts to drivel as something that somehow should command our time, we have good reason to shun and even resent it. We do need to care about things beyond ourselves but who wants to endure the institutional barrage of worthless or semi-worthless reports that can impose upon us throughout a given day if we allow it in this age of instant and ubiquitous communication? I wouldn't go so far as to say "please turn it all off" because then you do lose the ability to get a minimum exposure each day as needed to stay meaningfully informed as a person and as a citizen but I would say "give me one giant filter" to be able to control and limit the flow. Who can realistically profit from a daily surfeit of junk-bond-quality reporting and especially about things such as a sensational car wreck (or whatever) having little or no affect on our lives? Since that is what "news" mostly is these days, it is best to apply that one great filter available to us all - that is, personal self-control. That is what I love most about your comment: it reminds us clearly that it is within our power to use such self-control and to thereby focus on quality while filtering what is junk.

The article itself is somewhat dubious, as you note. Important note for those who would commend their views to others: scatter-gun assertions made in support of a point can leave one doubting how great is the author's grip on the topic at hand; if you have something to say, think it through and develop your points well before assuming that others will want to hear what you have to say. Not really well written at all.

Why was her diary secret? Well, because she wanted it so. And that should be enough.

When it comes to information that any given person regards as intimate about oneself, that should always be enough. It doesn't matter that someone else might peruse that information and say, "there is nothing special here." Why? Because it is not that person's judgment to make. There may be nothing special about my exact bank balance or net worth or state of my health or sex life or political or religious affiliations (or lack of affiliations) or any other information that I may consider private but that doesn't mean I want that information broadcast to the world only to invite identity thieves, malicious third-parties, political enemies, or anybody else who might bear a grudge or harbor an animus to have a field day with it. But they are just "facts", you might say. No, in the wrong hands, they are ammunition by which to hurt you if people want and, even if the facts themselves are innocent enough, people have a ready capacity as may suit their whims or prejudices or any other ulterior motives they may have to do you wrong and what may appear as innocent "facts" to one person can easily be transmuted into a vile weapon that can cost you your job, your important relationship, or any other of many things that might be the subject of someone's jealousy or other animus toward you (a lifetime of courtroom experience has certainly shown me how easy it is for a motivated adversary to take otherwise innocent facts and twist them into malicious aspersions if they really want to). What is more, even if nobody had any interest whatever in harming me through misuse of that information, it is part of my essential humanity that I can separate that which I regard as intimate (to me) from that which is made freely available for public consumption. There is a reason why the word "vulgar" developed negative connotations over the centuries: it originally meant nothing more than "belonging to the crowd." Well, crowds can trample on things you might regard as precious and it should be your choice and no one else's whether you want to open up important parts of your life for public consumption.

If I happen not to want to keep any part of my life secret, well, that is fine too. That is a choice every person can make for himself so long as he doesn't go about over-sanctimoniously proclaiming that others must do the same or harming others about him by revealing things that they consider intimate as he opens the book of his own life to the world.

It is the same in the business world. One can open-source his own works as a matter of commitment to the idea that all information ought to be free or for any other reason but that doesn't mean the law ought to abrogate protections for proprietary, trade secret information that most businesses need to keep confidential information as a matter of competitive advantage. If I am a broker who depends for his livelihood in serving a customer base that it took years to develop, I would be rightly upset if someone came in and simply handed all my customer information over to my competitors. So too would a development team that has invested huge amounts of money and time into a development effort that gives them a significant competitive advantage over others and whose business model turns on keeping that advantage to themselves exclusively. So too would most any company management if its confidential business plans for winning key markets suddenly got broadcast publicly over the web. Examples of this type can be multiplied endlessly and really are self-evident to anyone who has had much in the way of real-world business experience.

Again, any private business is free to make a contrary judgment and to open itself up at every level so that it maintains no private or secret information whatever. That is their choice. But, if I want to keep things secret in my business, no one should be able to force me to do otherwise or to try to shame me into believing that I am doing something wrong.

Laws and public policy cannot make these choices for us as individual actors but it is essential that they set up a structure to protect those who would seek to keep their confidential information private. How and to what degree that happens in practical execution can be a complex topic in our technological age but the abiding principle, to me, is very clear: privacy is valuable in any society and laws should be shaped accordingly.

So, why, then, is this secret? Because the person it most affects wants it that way and the rest of us should respect that person's wishes to keep it so.

Really nice write-up explaining stock options. A few added thoughts sparked by some of the comments already made in this thread and otherwise:

1. The value of options is inextricably linked to tax and you need to understand the tax basics in evaluating the economic risks and benefits of holding and exercising any kind of option. With NQOs, you are taxed on the spread as ordinary income on the date of exercise (meaning, on the difference between what the stock is worth and what you pay to exercise). With ISOs, the value of the spread becomes subject to AMT and you can wind up paying large taxes that way in spite of the supposed tax benefits of ISOs. The way to avoid having a large spread subjecting you to such tax risks is to exercise as early as possible before the company value goes up much but you then need to take the economic risk associated with having to pay hard cash for stock whose long-term value is highly uncertain. Moreover, early exercise is not possible if your options haven't vested unless you specifically get an early exercise privilege as part of your grant. With an early exercise privilege, and particularly if the grant is made for a bargain price, you can early-exercise, file an 83(b), and (as long as you hold the stock for at least 2 years) get the equivalent of a restricted stock grant by which you pay no further tax until you eventually sell the stock at a liquidation event. In that case, you are also taxed at the lower long-term capital gains rates. Of course, in the early-exercise scenario, you do not get to bypass vesting and your shares remain subject to their original vesting requirements and can thus be forfeited in whole or in part if those requirements are not met. But early exercise does provide an elegant solution to most of the tax risks associated with options provided you are willing to assume the economic risks of paying for the stock up front.

2. Other than the early-exercise scenario, 83(b) elections are not required for option grants. Under 83(a) of the Internal Revenue Code, any service provider who gets property in exchange for services is taxed at ordinary income rates on the value of the property received. For example, if you do work for a startup and are paid in stock when you complete the deliverable, you are taxed on the value of the stock received. You are taxed on the value of that stock as it exists as of the date you receive it in payment for such services. So, if you do development work tied to a milestone, and you meet that milestone, and you get 100,000 shares for the work, you would be taxed on, say, the $1.00/sh that the stock is worth on the day six months or a year (or whatever) out when the milestone is met, and not on the $.01/sh that it was worth when the contract terms began. In contrast to this performance-based form of incentive, let us say that you get a time-based incentive by which you buy the stock up front for a nominal price but you must earn it out over time. With such a time-based performance incentive, which is what is called "restricted stock", you own the stock up front and you pay no tax at the time of purchase in the normal case where the amount you pay for it equals its fair value on the date of the grant. Because the stock must be earned out as part of a continuing service relationship, and is hence subject to a "substantial risk of forfeiture", there is a very important technical question under section 83(a) on what the date is on which you are deemed to have received the stock in exchange for your services. Well, the default rule under 83(a) is that you receive it on the date it is no longer subject to a substantial risk of forfeiture and that then becomes the relevant date on which the value of the stock is measured for purpose of computing the taxable service income on which you must pay tax. So, if you get your 100,000 share grant at $.01/sh, and you pay $.01 share, you pay no tax at inception. But, as that grant vests at, say, a monthly ratable rate over four years, the IRS treats you as having received 48 separate grants (one each month) over the four-year period. Thus, at each vesting point, you are treated as having received property in exchange for services under 83(a) and you pay tax on the difference between the value of the property received and what you paid for it. If you paid $.01 per share, and if the stock is worth $1.00 at a given vesting point, you realize $.99 worth of taxable income per share. In a venture whose value is rising quickly, in the absence of any saving mechanism, you might have as many as 48 separate tax hits (basically, having to pay tax on the difference between what you paid for your grant and the 409A valuation price placed on the common) just for the privilege of holding a piece of paper that may or may not ever have an ultimate cash value of any type. It is in this type of scenario, and only here, that 83(b) comes into play by providing that, in lieu of having to suffer under the default rule of 83(a), you can elect to pay all taxes up front on the grant and not be subjected to the often onerous workings of the default rule. This means that, for an 83(b) election even to be relevant, you must first own your stock (or other property) and that stock or property must be subject to a substantial risk of forfeiture. If you hold only an unexercised option, you do not yet own the stock and it is not subject to forfeiture (hence, 83(b) is not relevant). If you do an early exercise, though, and get stock under terms where it must still vest out and can be forfeited, then 83(b) does apply. But that is the only case normally where it becomes relevant at all to options.

3. Options really shine when they wind up on a level playing field with the preferred stock and they tend to dim commensurately to the extent they do not. Optimum case is IPO when all stock is (typically) forced to convert to common prior to the public offering and, thus, all shares participate equally in the benefits. This can happen too in big-scale M&A exits but a drop-off occurs on lesser ones in at least two ways: (a) where the total acquisition price is largely gobbled up by the liquidation preferences and/or management incentive plans; (b) where an acqui-hire occurs in which a few founders get a disproportionate share of the total value through employment arrangements made on the other side of the deal.

4. Given all of the above, and given that IPOs remain at far below the old bubble levels in frequency, it can be risky to lay out any excessive cash to exercise at any time before a liquidity event. Too many things can happen by which a seeming "sure thing" winds up evaporating before your very eyes, leaving you with no more than a pretty lousy capital loss that you get the privilege of deducting at the rate of no more than $3,000 per year unless you can find other capital gains to offset it against.

5. The 90-day tail for exercise upon termination of a service relationship applies only to ISOs and not to NQOs but, of course, ISOs have other advantages and they are what is typically offered in VC-backed ventures. In other types of ventures, where the company value is already somewhat high at the time of grant, I have seen executives bargain for and get NQOs with long exercise periods following termination just to have the flexibility to leave the venture if needed without being forced to forfeit the options.

6. In light of all of the above, having to pay an angel backer 25 or 30% of your gains to provide you with a risk-free exercise in an otherwise high-risk situation may be worth it even though the cost seems high on its face. It is a matter of preserving some decent part of your potential upside while giving up the rest to make the upside potential even a possibility for you given the tax risks involved. If IPOs come back strong some day, then you may be giving up too much at such a cost because they are the great leveler when it comes to weighing the value of options against other forms of equity holdings. Until that day comes, however, options remain a valuable but relatively high-risk way of deriving value from a startup if you need to part with any significant cash (either for the purchase or for the associate tax) for the privilege of hoping to profit from a startup. Again, for those who need to weigh their choices, this piece provides great insights and stands head and shoulders above the typical discussion of such issues. Great work by the author in making an otherwise dry and even formidable subject pretty accessible.

(Appending this to my own comment as a way of acknowledging the comments made in response to my question)

I stand convinced that, though the majority of people will not be necessarily learn to code in the sense of developing full-fledged programs, there is much to be gained by exposing young people generally to the concepts behind programming and to encourage them to learn these concepts: this will inspire some to make programming their work and it will benefit all by giving them at least a basic working literacy about how the digital world around them actually works.

Thanks to all for your thoughtful and instructive responses. HN is truly a great forum.

Speaking as a non-coder, but as one who did minimal things with programming-like higher-level stuff ranging from the old DOS batch files to VBA and some dabbling with SQL, I am curious whether real engineers believe the idea of broad literacy in coding truly would be valuable and, if so, how exactly.

I am not speaking as a skeptic, just as one who does not readily see the point and wants to know.

Of course, we are in a digital age and there is incredible value in knowing how to code for the person who really masters this skill. And, among those who do master it, you will of course have various gradations in skill level ranging from profound to excellent to good to competent to serviceable, and these in turn will give the bearer of such skills a range of opportunities commensurate with the acquired skill level (and, when I say skill, I don't mean mere technique but also inspiration, insight, imagination, and whatever else it takes not only to pound something out but to do it in ways that stand out).

That said, however, if I were to look, say, at 100 random friends and acquaintances, I would question what good it would do for them to learn a few basics about the syntax of some programming language, to learn a few things about programming objects, and to learn a few things about control structures if the sum total of all those few things is simply to understanding minimal things about how coding works without being able to apply that knowledge effectively to anything in their real-world lives. In my own case in having hacked through some minimal interpretative stuff, I at least had some professional uses for this sort of thing (e.g., using VBA to systematize a few MS Word functions needed in our office). But, even at this level, most of the people around me - being non-programmers - would run in horror from the idea of even getting into that level of trying to interact with a computing environment. For the most part, they were content to know as little as possible about any of the inner workings of a computer and were totally uninterested in delving any deeper. And these are the people who are out there by the millions who have always been drawn to the simplest ways of interacting with their computers (e.g., mouse and not keyboard). In my experience, unless people naturally have a mathematical or engineering "bent," they simply would rather not deal with understanding how something like a computer works beneath the surface but want only to grasp its benefits at the highest level with the least effort possible.

If most people are indeed like that (and I believe they are), how would it benefit them in a practical sense, say, for future educational curricula to mandate taking a prescribed course in learning to code. Even if this sort of thing were required, wouldn't this be just like a prescribed foreign language course in middle school that one has but a fleeting acquaintance with, only to have little or nothing stick beyond getting past the requirement for the purposes of passing a class. What residual value would stick from such fleeing interactions with the rudiments of coding?

It seems to me that, if one is to derive true value from learning to code, one needs to devote a significant level of dedicated hard work toward that effort and, if one fails to get beyond a minimal threshold, the only value gained is that of a very generalized form of knowledge that has little practical use in the real world. And I would suspect that most people really do not want to devote such an effort to this task. A good many do, of course, and, as noted, this does have huge value in our digital age for those that do. But why expect it of most people?

There is nothing wrong, of course, with our political leaders encouraging young people to learn to code and this may inspire some to do so. But coding is not really like, say, writing, where gaining a minimal proficiency leaves one in a much better position than not knowing how to do it at all. It seems that, if most people can't get beyond some minimum threshold to make the endeavor worthwhile, learning to code would not help the great majority of people who are not interested in making the sort of dedicated effort that only a relatively minority will in fact make to justify the effort in practical terms.

That is my layman's view. Do those who really know this stuff agree or is this just some disconnected elitist view of people that doesn't fit with modern understanding? I would genuinely like to know because, to me, it does not seem like a close question. Am I just being prejudiced here?

I am intrigued by the antipathy that is often expressed toward Airbnb in the very circles where technological changes is heartily approved. Much of this antipathy is centered around the issue of persons who use the service to circumvent local laws and regulations governing hotel and rental units, with the complaint being that illicit profiteers should be suitably punished and (impliedly) so should those whose services allegedly abet them. This piece makes that complaint without stating it directly dramatizing the fact that such a person is there, in the flesh, exploiting the system, while stating that Airbnb wants to deny his existence.

Legally speaking, Airbnb is like YouTube and similar services in offering a service that is perfectly legal to do in proper cases and that can be done today to the immeasurable benefit of many in ways that could not even have been dreamed of in the pre-internet age. When the service is used legally and properly, it transforms how millions of people do things in their lives and does so for the better: in YouTube's case, as an outlet for video display and in Airbnb's, as a way of helping all sorts of people make more efficient use of their residential holdings. When the service is misused, however, others can be hurt: in YouTube's case, with persons posting and potentially profiting by infringing the copyrights of others; in Airbnb's, with persons attempting to circumvent laws regulating uses of commercial rental space. In each case, there is legitimate reason for many to complain of the misuses because they hurt people and people react to being hurt, and the law has measures in place to punish the direct malefactors in various ways. Yet what does this mean, legally speaking, for the provider of a lawful and, indeed, exceedingly useful service that is seen to profit in part from the activities of those who not only use their service legally but also from those who do not.

When you get to such cases, you arrive at the intersection of law with public policy. Unless one is to bar technological progress and the change that it brings altogether, one must devise rules to address the illegal uses that are bad while preserving incentives to promote the technological progress that is good.

In the case of YouTube, this was done through DMCA, which (whatever its other problems) did a pretty good job of setting up safe harbors that enable services such as YouTube to continue to do what they do without incurring liabilities for the wrongs of malefactors while at the same time requiring them to build in safeguards to protect the rights of those who might be hurt by their wrongs. This was not an easy task and even today the courts are sorting through the frictions occurring at the edges. But, though not perfect, the law has set up fundamental rules that, in the end, have managed to curb a good number of the wrongs while enabling a worthwhile service to survive and prosper.

In the case of Airbnb, the fights are occurring at the local level and are at an early stage. As the players sort through the policy issues, though, the same sort of primary issue needs to be addressed as happened with YouTube in the video streaming area: how can the rights of victims of third-party wrongdoers be protected without barring or significantly impairing the new-found value for many in using a great new service wrought by technological advances (and, of course, by the skills and talents of those who have built the service)?

I don't know the New York rental market at all and have nothing to say about how the issue is best resolved for the various persons affected by Airbnb's service there. I sense intuitively, though, that things like "15% across-the-board tax" are innately retrograde solutions that would serve to choke the beneficial and legal side of the service. Occasional users really are not in the business of providing hotel lodgings and it is a pretty big leap to say that they should be required to pay taxes as if they were. Or to require them to be subjected to liabilities and risks in ways that hotels are. These "solutions" are really just a way of governmental regulators, should they adopt the, acting on behalf of some narrow lobbing interest or other to choke a service that benefits countless others. They are overkill and would be the same as if Congress, at the federal level, had passed laws saying that YouTube-style services should be banned because they can facilitate copyright infringement that hurts others. That sort of "solution" would have been folly in our digital age and so too would any overkill-style governmental solution affecting any beneficial and innovative technologically-driven service that can come about by linking what people have to offer with what people need to use, and that includes Airbnb. Many other such services can easily follow (the "Airbnb for food" or the "Airbnb for whatever"). Do we really want to choke off the great benefits that can come from all this just because third-party abuses can arise.

The key to all this is to deal with the abuses while preserving the values conferred by the new services. If there is antipathy toward the wrongdoers, there is no basis for directing this to the innovators themselves. Why this should be happening among those who otherwise favor technological change is something that really baffles me. I for one commend Airbnb for what they are doing and for the benefits it can bring to many. If they make fortunes out of it all, so much the better. The potential third-party abuses do need to be dealt with so that innocent people are not harmed. But they need to be dealt with in narrow ways focused on the actual problems, not in blunderbuss fashion that is short-sighted and, in the long run, harmful to us all.

A few thoughts (apologies up front for the somewhat longish technical aspects of the discussion):

1. YC has once again managed to innovate in fascinating ways that help promote startups. And, it should be said, the legal work behind formulating this instrument called a "safe" is both sophisticated and commendable. It is at once simple and subtle and it covers a lot of nuanced legal technicalities that must have required some pretty careful thought to get right. The result should be extremely helpful to startups and their founders and gives founders one more powerful tool to use for their most important funding needs.

2. The safe enables founders to raise early-stage funds without having to do a premature equity round. The tax laws create problems for startups and their founders if they raise money from outside investors too early in exchange for stock grants. This typically winds up putting an unacceptably high price on the common stock, creating tax risks for all concerned and also lessening the value of incentives that can be offered to key people going forward (fuller thoughts here: https://news.ycombinator.com/item?id=6849648). If first outside funding is to be deferred, though, the perennial challenge becomes how to fund the interim process.

3. The convertible note meets this need by combining the attributes of debt and equity instruments. The investor loans funds to the company and the company signs a note promising to repay the principal with interest. If, however, the company can do a qualified funding before the note matures, the debt converts into preferred-stock equity on the terms struck with the equity investors at first funding, usually with a price discount, sometimes with a price cap, and typically with merger-premium protection for the converting noteholders for the added risk they take in being early in the game when risks are at their highest. In that case, the debt vanishes and the noteholder becomes an equity holder and everybody wins in terms of optimal positioning of their respective stakes in the venture: founders have gotten their cheap stock that they can hold until a liquidity event, at which time they can sell typically for long-term capital gains and with no intervening taxes to pay; noteholders have gotten their equity stakes with all protections and with no-less-favorable pricing than that offered to the preferred stock investors who presumably have negotiated a good, arms-length deal for themselves; the company avoids a too-early high repricing of its stock so it can continue to offer good incentives to new team members as they join; and the company does not usually have to fool with 409A valuations or with other strings and formalities attending the bringing in of investors via equity rounds. All of which is great. But debt is debt. And, unless and until a first funding occurs, it must be carried on the balance sheet as debt. Debt also carries interest. And when it comes due, the noteholder has a legal right to sue for its repayment if it is not paid. If the noteholder wants to extend the term, a series of formalities are required to do so and, in their absence, the parties stand at legal risk.

4. The convertible note supplanted an earlier form of convertible note used many years back by which individual investors would see startups as being much akin to small businesses and would loan the money to the venture with the primary aim of making a good interest return on their investment. This might be called an "optional convertible" note and I remember doing many of these back in the day as a lawyer. That sort of note saw the conversion right as a privilege belonging strictly to the noteholder. In the normal course, the debt was expected to be repaid with interest. It might even be secured with the company's assets as collateral. It might be personally guaranteed by the founders. These were all the normal lender protections expected by those who had the investment mindset of that day. The conversion was there as an added perk only: if the company happened to do very well, then the investor could forget about the debt as such and could instead elect to convert it into equity (very typically common stock and at a price set up front, at the time the note was signed). So, for instance, an investor would loan $50K at 10% interest at a time when the company had little value but could elect to convert at, say, $.50/sh at any time in the sole discretion of the investor. The mindset in this era, then, was primarily upon the debt as debt but with an equity kicker to cover long-shot cases.

5. This mindset all changed during the bubble era, when convertible notes came in to help solve the early-stage funding problem. With its "forced conversion" element, it not only combined the elements of debt and equity but did so with equity being the main focus of the investor. Few if any investors by that time were primarily interested in being repaid the debt owed by the company. The equity upside motivated the investment and the debt came to be seen as added insurance just in case the venture did not pan out as hoped. Because of its force-conversion attribute, it was regarded under law as a "security," which basically means that the investor casts his lot primarily with the managerial efforts of company management while forgoing legal rights intended to protect a debt-type investment.

6. The safe seeks to confer the benefits of a convertible instrument without carrying with it the baggage of debt. It would thus be regarded under law as a "convertible security." That means the debt protections largely go away for the investor and the investor places his bet almost entirely on the efforts of company management. Thus, if this instrument achieves widespread adoption, the investor mindset will have evolved over the years from "loan with equity kicker" (old form of optional convertible note) to a convertible-note-style security instrument with true loan features (today’s conventional convertible note) to a pure convertible security (the safe).

7. I think it should work beautifully in the YC context. Whether it will achieve widespread acceptance or not will depend on investor expectations. I am not so sure. After all, the earliest investors do take the biggest risks. Is it enough to compensate them with a discounted price or price cap at conversion? If I were to guess, I would say that it is enough in the YC context. But it will be interesting to see if investors generally come to feel this way. In effect, the safe does leave founders saying to early investors, "Give us your money and but wait on getting your equity: if it goes well, you get equity; if it does not, you get nothing and you have almost no rights." Apart from a very vibrant context such as YC, where investor demand is already high, I am not sure how well that will sell when all the investor needs to say in response is, "how about us just doing a convertible note instead." I personally believe that for the general range of cases the pull toward a conventional convertible note will be very strong, and founders will have real difficulty convincing investors why they should forego the benefits of a convertible note in favor of a convertible security where the only advantages to the latter lie strictly with the company. But who knows? The YC magic has worked before to transform investor mindsets (I vividly remember how horribly out of favor convertible notes were just a short while back) and it may work this time too. Whether it does or not, we can all be thankful that YC is doing great and innovative things to add to the vibrancy of the startup world, and the safe is one more thing to add to the list (kudos to their excellent lawyers as well).

Evil behavior, however precisely defined, has been and always will be with us. Technology enhances what we do as human beings and, hence, always has the potential to be applied to ill uses. If someone, then, takes what you develop and applies it for a purpose you never intended in creating it, that is an item beyond your control. Alan Turing - who applied his genius to confer what can only be called immeasurable benefits on society and who used his skills to crack Nazi codes to help end a terrible war - is not ethically responsible for the many consequences inevitably brought into the world simply because computing power can be used to magnify the effects of human evil. Was he (or is any other engineer whose technology is misused) a causal agent in the various bad outcomes we can identify in, for example, the enhanced lethality of weaponry or in the massive spying by governments on their citizenry? In a narrow sense, perhaps yes. When one traces things back up a causal chain, one can theoretically identify every individual actor who made technical innovations that culminated ultimately in a particular bad use of whatever type that afflicts us today. But, though a cause-in-fact, Mr. Turing (and the many engineers who followed him respecting any given facet of computing technology) is not what the lawyers call the "proximate cause" - that is, the immediately enabling agent - of the outcome. Meaning, if you deem it unethical to build bombs, then don't do work for a defense contractor helping to build bombs because your every innovation will be immediately applied to a use you deem unethical. The same for working for NSA in developing sophisticated spying technology. Or for whatever other ill use you can identify in society. But, beyond avoiding direct conduct by which you are proximately helping to cause an outcome you deem wrong, you as a technologist basically have no control over how your work may be applied by others and, as the collective results of such work eventually permeate society, your moral responsibility for the indirect results of your work effectively stand at zero. If the operative standard were otherwise, then all innovation would stand frozen altogether because it is always possible to conceive of an ill use for any technology that makes things faster, more powerful, more efficient, etc. Put any such thing into the hands of human actors and some bad results are guaranteed to follow given enough time and opportunity. Thus, unless one is to freeze all productive activity or is to go insane second-guessing how others might pervert that which is being done for good, engineers must perforce ignore tangential ethical implications over which they have no effective control.

I think it is fair to say that each of us in our given professions (mine being law) ought to avoid being a proximate cause of something deemed wrong even though technically legal (for example, I would not be a "mob lawyer" even though there are some technically very good lawyers who do that work). But even here that is an individual choice for each actor to make. For engineers, some may see it as a great opportunity to do advanced work in some of the social media companies while others may regard such companies as being engaged in unethical conduct as they at least sometimes use dubious techniques to try corral us as consumers into their tight little worlds. For any given engineer, working for such a company doing such things is a matter of conscience. Some may say yes, others no. The same is true in working for a defense contractor or for the government. Or for any other work that is legal but ethically suspect in the eyes of some but not others. It is your choice and it is your conscience.

The author of this piece reflects what I call the bane of associational thinking. He uses the royal "we" to define a group (here, engineers) and then prescribes very broad goals for what "we" "ought" to do. Since all the things described now stand as a matter of private choice over which the "we" group as a whole has no say, then the only way to translate this sort of thing into practical action is to form formal associations, assign things to committees, and then issue a series of prescriptions on what the group members ought to do. That may be fine in terms of the association giving rules that amount to exhortations to do good (who would disagree with that). But, beyond that, do you really want an organized association dictating what today stand as your private choices for your career? Or, worse, do you want such an association to lobby governments to adopt their strictures and give them the force of law? I would think not. How, then, can "we" do better? Of course, the question is always described as difficult and is left for further discussion precisely because it has no real answer apart from acting on individual conscience or apart from the potentially coercive ones of letting some association or government dictate your career choices and opportunities. Perhaps this sort of reasoning is justified as encouraging people to have a heightened conscience about what they do, and in that respect it is fine. But that is really as far as it goes before veering into unacceptable alternatives.

Our capacity to do wrong is innate to our nature, as is our capacity to do good. We should not stop trying to do good through our creativity just because others can take what we do and commit wrongs with it. Nor should we feel guilty about what we do as long as we in good conscience can say to ourselves that we are doing something productive and worthwhile and not directly causing harm to others. The "we" issue is in reality much more of an "I" issue and, for that, you should examine what you do carefully and strive for the good regardless of what others may do with it. If you want to exhort others to do better by your standards, then all the better. Just don't dictate to them on matters over which people in good conscience may disagree.

While there is a pithy debate going on about Kima and how it fares in an economic comparison to YC, I will throw in my more technical assessment of what founders should consider in deciding whether the sort of up-front equity funding offered by Kima is right for them in the first place.

Seed funding can be a tricky proposition for startups.

The broad choices in dealing with the early expenses are: (1) self-fund by making founder loans/advances to the company, whether for demand or convertible notes; (2) get friends and family money, usually in the form of a convertible note; (3) go to institutional investors and either argue for an acceptable valuation as part of a seed equity funding or bypass that issue and hope to get bridge money via convertible notes. Of course, in the right cases, founders can also sell products and far-more-typically services to generate enough funds in the early going to fund development efforts tied to a longer-term strategy.

In working with founders over many years, it has been my rule of thumb that they should not do too early of an equity round unless there was some very special reason for doing so. Equity rounds come with strings and complications. They require that you set a value on the venture. That in turn means you need to negotiate the issue of price precisely when you are at your weakest as a founder trying to build value. It also means you create tax risks and complications: if the equity round is too near the time of formation, the $.0001/sh pricing used by founders for their shares may look funny next to the much higher amount per share paid by investors, raising risks that the founders can be deemed to have received their shares at the higher valuation as potentially taxable service income; once you do an equity round, you will need to do 409A valuations in connection with doing option grants and that necessitates getting outside independent appraisals; equity rounds come with strings, including investor preferences, investor protective provisions limiting what you can do as a founder without investor approval, co-sale and first refusal rights favoring investors and concomitantly limiting founders, board seats and/or observer rights for investors, and the like. Much of the "distraction" that founders face in raising money exists precisely because a typical equity round can be a complex process and, apart from needing to sell the economic proposition behind their venture, founders must also make sure that any funds they do take in are taken on reasonable terms. Sorting through the issues of company valuation, preferences, and similar issues takes time and can be a grueling process. What is more, when you have emerged from the process, you will find yourself having to price your equity incentives to key people you are trying to attract at a much higher price than you otherwise would have if you had not done the equity round.

So, in the early stage, it is usually best to defer all this and focus on building value with funds made available through some sort of bridge instrument such as a convertible note if possible. In such cases, with institutional investors, you may still find yourself arguing about valuation in negotiating caps but the process is nowhere near as involved as it is with a typical equity round and founders with leverage can usually dispense with caps as well. Apart from the cap issue, most of the other complications simply go away. You retain substantially complete founder independence with almost no strings on what you can do going forward (subject to normal legal rules involving fiduciary duty, of course). You retain virtually complete control of the timing and terms of your future funding choices without needing investor approval to make the choices as you like. And you basically eliminate the tax risks altogether. Finally, because you have not had to price your stock, you retain flexibility to continue offering very cheap equity incentives to others, including those who may become potential co-founders, without creating tax problems for them or for your company.

There are cases where founders prefer to do an equity round in spite of the complications. Maybe they can get the equity on good terms with a favorable valuation and even without the complications of doing it as preferred stock (e.g., in some friends and family situations). Maybe they prefer not to have debt on their balance sheet, with the legal obligation to pay it back in case they can't do a qualified funding round. Maybe they just need cash fast and the people they are dealing with it are ready to do it on oppressive terms that are easier swallowed than would be shuttering the venture. Or, on the positive side, maybe it means taking funds on less than ideal terms but from an investor who will add large value to the venture apart from the cash element. Who knows? It is a big world and people have all sorts of reasons for choosing one way or the other. The point is that they need to think through the pros and cons carefully and make a wise choice for their circumstances.

The Kima offering offers fast cash to qualified ventures. This has an obvious advantage of being simple and fast for those who qualify. Whether it is the best choice for a given venture turns on how the founders in that venture see the trade-offs. If you take the Kima offer, you will wind up doing an equity round. It will be for preferred stock. It is for cash only, with no value-add. Thus, you will have the tax complications that attend an equity funding, including needing to price your stock and option grants based on the $1 million company valuation and the need to do 409A valuations. Moreover, the strings that appear in Kima's term sheet are not trivial: the valuation is based on no larger than a 5% equity pool; you give up a board seat; you give Kima a broad veto power on many of your future actions relating to fundraising and other important company matters; you agree to restrictions on how the value is shared in case you are acquired. If the answer to this is that it is worth it for many startups to make such tradeoffs in exchange for fast cash, I would add that these funds are not being offered to just any startup. Kima reserves the right to cull through the submissions and pick from the best only. While that is fine, of course, it does mean that the value of the offering must be weighed against other choices open to the same level of quality startup that it hopes to fund and not against the more limited choices open to just any startup. The biggest question I would have for those startups is this: fast and easy cash, yes, but are the complications worth it for $150K if other reasonable options are open to you? While they may be for some, for a good number the answer would very likely be no.

How does Kima compare with YC? PG has assessed the broad economic proposition to which I would add the following: YC does take an immediate equity grant but does so with common stock and on terms that don't affect founder stock pricing. Thus, near-complete founder freedom is preserved and there are no special strings that come with the investment. This stands in pretty sharp distinction to the Kima terms, which involve preferred stock and a number of strings. But by the far the biggest differential that I see comes with the value-add piece: with YC, founders pay a price in terms of equity they give up but they get huge benefits from becoming part of a network that keys them in to relationships and solutions that can prove invaluable to an early-stage startup. In effect, founders pay (somewhat) dearly in early equity to partner with a powerful ally that may dramatically speed up and enhance their path to success. This sort of trade-off is not worth it for all companies but, for those that dream to do significant scaling and that need to have doors opened to future VC investors, the YC stamp of approval and the YC resources offer value that is not easily found elsewhere. Of course, no angel investor, Kima included, can match this in any comparison, though such investors can add value in various lesser ways from their relationships and the like.

Different founders have different needs. What Kima is doing is new and innovative and the people behind Kima are savvy and sophisticated players in the startup investment world. Therefore, it is very nice to see this sort of slant on seed financing. But, again, there are always trade-offs and founders should weigh these carefully in deciding whether the Kima way is the way they want to choose.

I am not a technology expert and I am not a marketing expert but, as a consumer, I have moved gradually over the years from using Amazon primarily for online book-buying to using it extensively for all kinds of retail buying needs. The Prime service has been central to that experience because human psychology appears to be perverse and something so small as "free" 2-day shipping, though not really free, seems to have given me ample incentive to buy from Amazon when I could just as easily have bought from someone else. I am not sure why exactly. It just proved the path of least resistance. Being fast, efficient, and reliable, it worked and makes me a reflexive Amazon customer. I buy books, DVDs, select grocery items, and quite an array of other things from Amazon that I could just as easily be buying from others and "free" delivery via Prime has been a major factor in shaping that habit for good or for bad as concerns whatever my true self interests may be in the buying choices. What is more, as video streaming has begun to supplant things such as DVDs, I have moved somewhat zombie-like into Amazon's Prime streaming service for the reason, among others, that I have developed my reflexive relationship with the company and have found it easy to try their other offerings before I will move to offerings of other vendors. Again, this has all been bundled with Amazon's Prime service, with which the company now packages a broad range of "free" streaming resources into the annual cost of the service.

If my experience is at all typical of other consumers, I would guess that Amazon's Prime strategy is central to its whole attempt to conquer worldwide retailing and therefore that amazing delivery capacity lies at its heart, whether instantly via things such as video streaming or highly expedited in the case of tangible products.

Now Amazon could continue to rest comfortably upon its existing accomplishments by which it has used third-party delivery services to achieve a big part of its goals. But it is not. Indeed, it is spending huge sums of money to build massive warehousing facilities all over the place in support of a long-term plan to achieve super-fast delivery. And, in doing so, it has abandoned its former (and highly effective) strategy of trying to avoid physical "presence" in the various states in order to avoid having to hold back sales/use taxes from its customers.

So, fanciful or not in their present state of technological development and in the present state of legal and regulatory tangles that might arise, drones of the type shown in Amazon's promotional materials can hardly be called a simple marketing ploy to divert attention from some otherwise critical publicity affecting Amazon or its founder. The huge benefits to Amazon as a universal retailer that might from such a delivery mechanism are stupendous and obvious. If it should prove unfeasible to gain these benefits owing to technological limitations, that is one thing. If regulators should attempt to freeze delivery mechanisms to current forms and bar new ones such as drones, that is yet another thing. Such barriers may prove insuperable and cause the effort to fail. But to accuse Amazon of not being ready, willing, and able to devote even vast resources to the potential use of drones as part of its broader strategy - and instead to be using this as a mere publicity stunt - is, in my view, to miss the obvious. Amazon has a long-term goal of becoming the primary shopping source for millions of consumers across a broad range of products. It wants to leverage technology in ways that help remove the physical-presence advantage used by traditional brick-and-mortar retailers. If it can do so by building vast warehouses and then finding a magic way of delivering products to consumers in ways that better what they can do by visiting the local retail store, why not go for it. And not just go for it but really go for it, with a massive investment of time, energy, and capital with the long-term view of using this strategy to achieve potential exponential growth over competitors.

Whatever else this is, it cannot be mere vaporware. The fact that its announcement may have been accompanied by conventional marketing hype and by what may have even been a cynical deal with news outlets to agree to promote it on a big shopping day only confirms the seriousness of the effort, in my view. People like to get excited about exciting possibilities. Steve Jobs knew that and his way of presenting has become legendary. Mr. Bezos has some of that same flair and, when combined with adept entrepreneurial skills, stands to make an amazing mark in the annals of commerce. He may win in the end or he may lose. But he is going for the big win and he is doing it with flair.

You may like what Amazon is doing or you may hate it but it can't be denied that it is bold, daring, and very real. The author here misses it altogether in suggesting otherwise.

Law in general, and copyright law in particular, may be applied mechanically or it may be applied with insight, and the results can vary widely depending on which approach is used.

There is a lot in copyright law that would have allowed a judge to reject Google's fair use defense almost out of hand, as it were. Google had the temerity to copy some 20 million copyrighted works without the authors' permission. It did not limit itself to copying select portions for some discrete educational purpose but copied every work in its entirety. And it used those copies in a for-profit enterprise to enhance its business and advance its profitability. Taken as a whole, such factors would have allowed a court to conclude that the uses Google made of the copyrighted works readily failed to meet the requirements of the fair use defense and thus left the book industry, in effect, frozen in an early 20th century analog world.

Judge Chin, however, is obviously a judge who knows how to apply the law with insight and this shows him to be an outstanding jurist. Rather than applying the law mechanically, he stepped back to first principles and thought through very carefully how the copyright law ought to be applied in order to fulfill its intended purpose - that is, as set forth in the Constitution, in order to promote the arts and sciences.

His decision goes through the Copyright Act's four statutory factors primarily used for determining whether a fair use defense exists or not but is grounded in something far deeper than those factors. Yes, Google's use of the copied works was "highly transformative" and this weighs heavily in favor of a finding of fair use (first factor). Yes, the nature of the copyrighted works is that they are all published works and mostly non-fiction, and this too weighs in favor of fair use (second factor). Yes, the amount of copying is of entire works but Google offers search results in carefully controlled snippets, and these factors combined weigh slightly against fair use (third factor). Yes, the effect of the copying on the market or value of the copyrighted works actually enhances the sales of books for the copyright holders by increasing their visibility and making them accessible to potential buyers, and this too favors a finding of fair use.

All this is true, and is pretty carefully analyzed in the decision. But, in the end, this technical analysis is merely the backdrop for what primarily motivated the judge's decision and that was his overwhelming sense that laws must be applied in light of their intended purposes and not used to choke off the results that the very law in question was intended to further.

In other words (and these are my words and my assessment and not the judge's), it is ludicrous in an increasingly technological world that society should not benefit from a project so stupendous as that of a private party investing enormous resources to transform millions of obscure works of literature into a treasure trove of searchable materials made freely available to users of all types, including those who have historically been physically impaired from using them at all, and all the while taking all reasonable steps to ensure that these materials are offered in a way that respects the legitimate concerns of the copyright holders. Copyright gives authors substantial rights to control what is done with their works. It prevents others from exploiting such works commercially without their permission. But this has never prevented others from making fair use of those works for educational goals and the like. In educational settings, it has been possible for a long time now to copy quite freely from copyrighted works for class projects and the like. Such copying is deemed fair because, while not significantly impairing the true commercial rights of copyright holders, it furthers the progress of arts and science. And that is the point of what Google is doing here with its books project. In ways for which many are deeply thankful, it is using all the resources of modern technology to add huge value to otherwise dormant copyrighted works and to use the resulting product in ways that truly advances arts and science. If copyright should be used to defeat that sort of project, then it undercuts the very rationale upon which it exists in the first place. Though if applied merely mechanically, it might be used for such a purpose, it ought not be used that way. And that is, in essence, what Judge Chin concluded.

Here are his words on this point: "In my view, Google Books provides significant public benefits. It advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders. It has become an invaluable research tool that permits students, teachers, librarians, and others to more efficiently identify and locate books. It has given scholars the ability, for the first time, to conduct full-text searches of tens of millions of books. It preserves books, in particular out-of-print and old books that have been forgotten in the bowels of libraries, and it gives them new life. It facilitates access to books for print-disabled and remote or underserved populations. It generates new audiences and creates new sources of income for authors and publishers. Indeed, all society benefits."

This is a soundly reasoned decision that is a highlight of modern law not so much because of any deep legal reasoning as such but because it profoundly captures and applies the spirit of the law in ways that comport with modern technological advancement. The decision protects innovators such as Google while upholding in every fundamental the legitimate interests of copyright holders. In this way, it upholds the traditional framework of the law while allowing it to be sensibly applied to new developments. There is nothing revolutionary here. But it is an encouraging sign that courts are able to adapt to the times and is thus a highly positive development.

If your startup lawyer deals straight with you, gives you honest estimates, bills for time actually spent, uses good judgment in managing the legal time spent on your matter, avoids duplicative billing, is willing to deal fairly with situations when you question a billing item and have reasonable reasons for doing so, and, of course, does the job right and is a good lawyer to work with, then be thankful and do not quibble around the edges about things such .1 billing increments, small expense items advanced and expected to be reimbursed, and the like.

Remember that lawyers are in business too and want to devote their efforts where they will be most rewarded and appreciated. While that certainly doesn't mean cheating a client, it does mean dealing with clients who see the lawyer as a trusted ally and not as an adversary and who will not be nibbling at the ankles with every step a lawyer takes.

In dealing with any lawyer, watch out for padded bills that have vague descriptions of what was done, beware getting billed for substantial amounts of lawyer learning time, scrutinize all cases where double billing might be involved, make sure billing rates match your needs as a company (big firm vs. small firm), try always to get estimates in advance, negotiate fixed fees or caps where appropriate, get timely bills sent to you, review the bills carefully, and question billing items that don't look right. As concerns lawyer billing, those are the big items. If you pay attention to those, you will maximize your chances of getting good value from the firm and minimize the risk of abuses. Beyond that, you normally can ignore the small or trivial points. Remember that it is a professional relationship and mutual trust should be the order of the day. If it is not, then maybe it should not be maintained as a continuing relationship.

In law, we are taught, "make it fresh and vivid." Stories do that when they are well told. People relate. It makes an abstraction real to them by bringing their experience into play. It gives them a hook by which to remember an important point. This does not mean, "tell a story every time you want to make a point" because straining for effect while trying to persuade, even in trying to weave stories into your narrative, is self-defeating. The point is not to show how how clever or artful you are, it is to make your points in ways that will stick. To do that, you need above all to be sincere and credible. You need to use the power of logic where it applies. You need to bring in emotive elements when apt and when they fit naturally into your narrative. You need to use imagery that is original, not borrowed, drawing from your experience if possible and then from the use of a vigorous imagination. And you need to do all this with forceful use of language, with active style that moves quickly without pausing to try to impress.

When you do all that, and do it well, you will find your audience at each level relating to you and to what you are saying. Stories can add powerfully to that relational effect. Like a fellow out in nature watching birds from afar and suddenly seeing them up close and vividly through magnification, your hearer or reader will find himself drawn close to what might otherwise be a distant narrative through stories that enliven the very things he is eager to see. Your audience wants to relate. Help them along with this with stories where apt. If knowing the science behind this helps, apply that as well. But, at least as far as effective communication goes, don't forget the broader context. We get bored and glaze over all too easily. Make it fresh and vivid. Make it original. Make it memorable. Then you will have spoken or written well. And your audience will value what you give them.

Lawyering in general, and business lawyering in particular, is an art in which good judgment counts a lot more than mere technical precision.

From a lawyer perspective, a written contract may have all sorts of areas in which it falls short of an ideal in capturing all key issues potentially affecting a client. There are recitals (defining factual context), covenants (setting forth promises), conditions (defining when an obligation kicks in), and (often) representations and warranties (defining the extent to which parties stand behind what is purporting to be sold, etc.). In any of these areas, a lawyer can potentially find things that are inconsistent with what a client says the deal is supposed to be. Sometimes this happens because of unequal bargaining power, where a big company essentially presents a host of oppressive boilerplate terms and conditions as "take-it-or-leave-it" items. Other times, it happens because of what I call "slicko" tactics by the other party, where something that appears to say "x" in fact has a legal meaning of "not x" owing to the use of weasel wording and the like. Still other times, it happens because entrepreneurs are trying to cobble together their own contract by picking and choosing what sounds good from others they have seen and, in the process, failing to ensure that things don't conflict with each other or perhaps just omitting to address key legal issues by having put an exclusive focus on the business issues. Finally, it can come about simply because of either poor drafting by a lawyer on the other side or simple attempts by a party to overreach.

When you see this as a lawyer, what do you do about it?

First, the final say on such issues belongs to the client and not to the lawyer. So, after a high-level assessment, you talk with your client, explain the general range of issues and problems, and get direction on the desired level of response. Is the deal such as even to warrant legal review? Is it to be a high-level review only, just enough to let the client know what key risks exist and to address only egregious things that go to the heart of the deal? Is it to be comprehensive to try to catch and fix everything that is even potentially material, even if it deals only with issues that are highly unlikely to arise? Or is it to be something in between? This need not be an elaborate discussion and often takes only a few minutes. But it is vital to the process because it lets the client make an informed choice about how to proceed with the legal review.

Having gotten client direction, it is still important in all but mega-deals to keep a sharp practical focus in doing a review. What good is it to do a scorched-earth review and markup if the result will be overkill that is likely to alienate the other side (some lawyers who do this do deserve to be called deal-killers)? It really is poor business lawyering simply to proceed unthinkingly and one-dimensionally in every case to review and mark up everything no matter how remote the risk or how likely it is to be material. There is a dynamic to negotiations and nothing galls the parties more than to have to sort through a lot of lawyer comments over what they see as non-essential points for their deal.

On the other hand, it never pays arbitrarily to cut corners in doing a review. Just because a client says "spend no more than an hour on this" doesn't mean a proper review can be done with such bounds. If a lot is at stake, and a client is just being penny-wise and pound-foolish, it is better not to do the review at all than to gloss over all sorts of serious problems in the name of economy.

The lesson from this piece, to me, is that entrepreneurs can do well in keeping a sharp eye on the practicalities of managing their business opportunities and they should not let lawyers get in the way of that. A related lesson, in case a lawsuit ever did result on signing any complex contract blindly, is that entrepreneurs can act foolishly in casually inviting lawsuits by failing to manage the legal review process at all and simply signing complex contracts as is. The net of this is: use your lawyers in proper cases but make sure to use lawyers who have a good practical focus in addition to legal skill and then manage that relationship to get what you need from the services for your deal. In any deal that really matters, it is usually a mistake to proceed without lawyers and it is an equally big mistake to give the lawyers sole discretion in how to do the project. Be proactive and smart in this, just as you would be in making any other business decision.

Tax enforcement schemes are conceived, enacted, and executed by governments because they have a monopoly over the taxing power. If private profiteers are allowed to exploit local citizens, it is strictly because the entity holding that power has deliberately chosen to set up an enforcement scheme that arms those predators with everything they need to conduct their exploitation. The vultures, despicable as they are, would be powerless to do anything to delinquent but for being armed for the task by the enabling government. Is this abusive? Yes, it is massively abusive. But the remedy needs to go to the source of the abuse and that source is a faceless, uncaring local government that has elevated cost-savings over fairness and, when caught as it has been here, is trying to pretend that it can impose a few regulations at the edges to solve the problem. The real solution is to bring the enforcement back in-house where it historically resided and then collection procedures can be controlled and made fair to citizens. But, of course, that would vitiate the cost savings to the governmental entity from which it benefits under its current system. It should do it but don't hold your breath waiting for reform. It is much easier to blame the outside vultures (who are of course eminently blameworthy), impose a few patches to pretend to deal with the abuse, and go on with business as usual. Whichever way reform is done, if it is at all, one can only hope that it will be real and meaningful but I suspect it will not. Very sad to see the tragic consequences.

It is really tragic that we have reached a point where something so wonderful as Groklaw cannot effectively function.

Nearly 200 years ago, de Tocqueville asked why the American experiment in self-government succeeded while its French counterpart led to the guillotine, mob excesses, and ultimate tyranny and he gave a complex answer whose core was that private moral restraints in the populace served to check the unbounded passions in people that lead to oppression. In other words, the private life that each of us leads will hugely influence the way we are governed.

Governments are always ready to grab the greatest degree of power that the people will give them. That is the default because it is hard-wired into the human condition. And this is the major factor not grasped by those today who assume that society is evolving to a point that, if only right-thinking people with good motives are given enough power over our lives, they will somehow magically transform society for the good through government action. In reality, if any persons - right-thinking or not - are given largely unchecked authority over our lives, abuses will inevitably follow. As they gather huge amounts of power, their purpose in life becomes to guard that power jealously and to increase it as opportunities permit. No bureau has ever abolished itself. Farm programs from the depression era thrive today as ever, though the logic for their existence has long since vanished. Politicians of all stripes promote expanded budgets for their own areas of preferred government expansion and spend money they don't even have in vast quantities with little or no accountability to the people they supposedly serve.

This is why it is vital in a free society that its people be educated and morally grounded to value their rights as individuals and to resist and distrust unchecked authority in the state. Do we have that today? Perhaps, but only in a very weakened form. Many people today do not even give pause over the idea that the government claims huge amounts of unchecked power, whether it is to fight terrorists or to expand social programs. There is very little residue in our society of the old-fashioned principled belief that it is wrong to have vast centralized power with very few checks upon it. In her sign off piece, PJ notes: "Not that anyone seems to follow any laws that get in their way these days. Or if they find they need a law to make conduct lawful, they just write a new law or reinterpret an old one and keep on going. That's not the rule of law as I understood the term." This is lamentable but it is a mere symptom, and not the cause, of our ills. Politicians make the law as they go, with no accountability, only because they are allowed to do so by those whom they govern. And, if someone already has vast power over you, it is but a small step to extend that power in a technological age by using technology to spy upon, intimidate, and control people. Why, when these leaders are allowed to lord it over us as they see fit, should they suddenly develop scruples in gathering information that only serves to enhance their power to do what we are already letting them do without so much as a peep of principled opposition?

Privacy is in significant peril, and it is a serious loss when Groklaw goes down over this issue. But assaults on privacy are but a symptom of a deeper malady as modern society increasingly believes that it can hand over massive forms of unchecked government to its politicians in the naive belief that such power can be used wisely if only we have right-thinking leaders at the helm. The answer, as de Tocqueville noted years ago, is not to place faith in leaders but rather to take personal responsibility in our lives and to curtail the powers of those who govern. I guess we shall just have to wait and see if this is possible today.

In the meantime, we can praise those who fight the good fight, and PJ has been a supreme example of this. Tireless, talented, and astute, she has been a wonderful force for good over the past decade. May she find a powerful new outlet for those talents as she moves forward, even in a difficult environment.