Goliath's Revenge Part 1

I had a nice time in Bend (Oregon) last weekend, including a conversation after dinner with some friends, a nice summer night, staying light late; the subject of large companies screwing small companies came up. I had something to add — from experience. More of the "mistakes I’ve made" categories. They’re easier to talk about at the end of a good day, looking at the river, feeling at peace with things.

Before I get into this, I should point out that I’ve also had some very good deals and long-term relationships with large companies. For example, I consulted with Apple Computer almost steadily from 1982 until 1994; it was a large company, but I had no complaints. My company, Palo Alto Software, has had good long-term relationships with Inc Magazine, Prentice Hall, Entrepreneur, and several others. It’s not like all big companies are bad. But here’s a story, and maybe a lesson.

The Contract That Meant What it Said

We (two of us) sat in a conference room with eight managers of a very large company, wrapping up weeks of negotiations on a deal bundling a version of our software with a version of theirs. It was a tough negotiation. When we were very close, all the major points agreed, we flew to their location to do this final session. We had to go through things we thought had already been settled.  Finally, at the end, with everything supposedly settled, we signed a contract with a couple clauses we didn’t like.

One of them seemed to give them far broader rights than what we’d agreed. The word "unlimited" was there on the page.

"Don’t worry," they said, "that paragraph on page two is just for the disk duplicators, we have to have those rights or they won’t manufacture the disks. And you’re covered with the paragraph on page three, that limits our rights to exactly what we’ve agreed."

So we signed. Dumb. This belongs in the mistake bank for sure. But we did.

Three years later, our software appeared in a completely different context, way outside of what was agreed upon. I called the guy we’d negotiated with: no longer with the company. I called his assistant: no longer with the company. I called two others who’d been there: not longer with the company

Finally we took it to their corporate counsel. Actually to a person who was one of their legion of corporate counsels. We told him they didn’t have the right to do that.

"What do you mean," he answered. "Can’t you see it right there on page two? It says unlimited rights."

"But that’s not what we agreed," I said.



  • John Caddell says:

    Tim, I love this story. And thanks so much for mentioning The Mistake Bank. Is it OK if I post it there?

    Alas, I get a 404 Page Not Found error when I click on the MBank link in the post. I think it points to an incorrect URL.

    (For anyone looking for the Mistake Bank, you can find it at http://www.mistakebank.com.)

    Thanks again, Tim.

    Regards, John

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