Disruptions: Silicon Valley Makes Its Next Stop the Kitchen

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You're the Boss Blog: Is Silicon Beach Over-Hyped?

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From Myspace’s Ashes, Silicon Start-Ups Rise

J. Emilio Flores for The New York TimesFinding new ventures after Myspace: From left are Josh Brooks, Amit Kapur, Chris DeWolfe, Jim Benedetto, Colin Digiaro, Steve Pearman, Josh Berman and Aber Whitcomb.

IT is hardly uncommon for founders and employees of successful companies to cash in their chips and go on to start other successful companies. Perhaps the best-known example is PayPal, the Web payment service whose leaders went on to found and invest in a bunch of other companies — YouTube, LinkedIn, Yelp, Tesla — and to earn the nickname the PayPal mafia.

News from the technology industry, including start-ups, the Internet, enterprise and gadgets.
On Twitter: @nytimesbits.

In 2007, Chris DeWolfe, left, who was then the chief executive of Myspace, answered questions with Rupert Murdoch of News Corporation at the Web 2.0 conference in San Francisco. News Corporation acquired Myspace for $580 million in 2005 — but sold it for $35 million in 2011.

More recently, the alumni of another Internet company — a social network based in California — have generated an impressive number of spinoffs. But what is notable about these spinoffs is that they have been generated not by a spectacular success, like PayPal or Facebook, but by a distant also-ran: Myspace.

It is easy to forget that Myspace started before Facebook and could have been worth billions, but a variety of miscalculations and missed opportunities turned what was once a nearly $600 million company into an afterthought. By 2011, many of its users had abandoned it, the founding team had departed and its owner, News Corporation, sold it for just $35 million. (It is now reinventing itself as a site for musicians and other artists to connect with their fans.)

Yet from the ashes, a surprising number of start-ups have risen. Almost every member of Myspace’s founding team has begun a new venture, and several are among the leaders of Los Angeles’s blossoming start-up industry, now known as Silicon Beach. That community is growing for a number of reasons — an influx of capital, lots of young programming talent, a convenient nexus with Hollywood celebrity — but the Myspace spinoffs are a factor, too.

“In terms of creating enterprise value, of starting companies that are hiring and generating revenue, I’d say by far this is the most successful aggregation of entrepreneurs that has yet come out of L.A.,” said Paul Bricault, a venture capitalist at Greycroft Partners and a managing director with a digital media accelerator, Amplify.

Until recently, it was conventional wisdom that entrepreneurs in Los Angeles had little choice but to move north to Silicon Valley to finance their ventures, but the rise of Silicon Beach and the Myspace connection have helped alter that thinking. While the businesses started by former Myspacers have yet to produce a big exit or payday, they have amassed more than $100 million in venture capital financing.

Two of Myspace’s founders, Chris DeWolfe and Josh Berman, met as M.B.A. students in a class taught by Mr. Bricault at the University of Southern California. It was in that class that Mr. DeWolfe wrote a business plan for a social network he was then calling SiteGeist. When the site made its debut as Myspace in 2003, Mr. DeWolfe began putting together an unusual team, often basing his hiring decisions more on gut feelings than on résumés.

In early 2005, when Amit Kapur interviewed for a marketing job at Myspace, he was a year out of Stanford and his only work experience was a year in business development and digital strategy at NBC Universal. He met with Mr. DeWolfe and they talked for a few hours, after which Mr. DeWolfe asked Mr. Kapur, 23 at the time, to join the company as head of business development.

“I said: ‘Chris, I don’t really know what I’m doing yet. I can figure it out, but I don’t have the experience,’ ” Mr. Kapur said. “Chris said: ‘I believe in you. We’ll figure things out together.’ ” Although the job was daunting at first, Mr. Kapur said, he was energized by the challenge: “I wanted to prove myself, to make a dent, and Chris recognized that and gave me those opportunities.”

Today, Mr. Kapur is chief executive and co-founder — along with two friends from Myspace — of Gravity, a Web personalization technology company. As Mr. Kapur began to assemble his team at Gravity, which now has 40 employees, he modeled many of his practices on what he had seen at Myspace. “One of things I learned from Chris,” he said, “was to hire people that have the potential to do great things, well beyond what their experience and skill set show.”

At Myspace, Mr. DeWolfe sought to give his team the confidence to try new ideas and, if necessary, to fail. In 2008, Josh Brooks, who was vice president for marketing from 2005 to 2008, wrote a one-page plan for a live music and comedy show for 10,000 American troops at Camp Buehring, a few miles south of the Iraqi border in Kuwait.

Streaming a live show from the Kuwaiti desert, in the middle of an active military base, was a considerable technical and logistical challenge; more than 80 crew members and entertainers had to be flown there. Not many chief executives would have let him run with the plan, Mr. Brooks said, but the show was streamed live on Myspace to an audience of 3.5 million viewers and then became a one-hour special on FX Networks. Today, Mr. Brooks, who founded his own company, On the Run Tech, in 2011, compares running a start-up to being a “smoke jumper” who is “deployed where the hottest fires are brewing.”

Another early Myspace hire, Jamie Kantrowitz, started leading marketing efforts at Myspace in 2004, when she was 26 and had no executive experience. “There was no playbook. It was like riding on a comet every day,” said Ms. Kantrowitz, who went on to help found Gobbler, which offers high-speed file transfer and backup, and to become a partner at a tech accelerator, Launchpad LA.

BUT, perhaps predictably, there was a downside to the Myspace chaos. Many of the company’s survivors trace its decline to its uncontrolled growth and its purchase by News Corporation for $580 million in 2005. At its peak, Myspace had 76 million unique visitors a month, but in the post-acquisition period was less nimble and wound up missing opportunities to innovate, according to several early members of that team. As it swelled to more than 1,500 employees, it became cautious, political and bloated, Mr. Kapur said.

“That affected our performance and ability to innovate,” he said. “There were opportunities we just couldn’t take advantage of.”

The advent of YouTube is a good example. When the site started in February 2005, many at Myspace wanted to introduce a similar feature. Travis Katz, who had joined Myspace as general manager of international business just after the acquisition, said he remembered telling News Corporation representatives that they would need to hire 40 developers immediately and 200 the next year.

Bits: From Example to Excess in Silicon Valley

Another memorable moment for me happened roughly six years ago, when I tried Goog-411, an experimental phone service from Google. At a time when smartphones were far from ubiquitous, the service allowed people to call a toll-free number and obtain business listings by using voice commands. It was partly an effort to improve Google’s own internal software, but it left me marveling at its combination of technological brilliance and public service — completely in keeping with the company’s motto of “Don’t be evil.”

Since then, such technological good will has faded into a kind of disillusionment, and not just for me, it seems. It feels as if the promise of the tech world — its utopian ideals and democratic aspirations — has dissolved into much more selfish pursuits of power and wealth. And the promising developments or companies that do emerge are often dimmed by their flashier peers, who tend to get a majority of the attention.

Just look at Google’s impressive and much-hyped new product, Google Glass. While undoubtedly representing a technological leap, it has been criticized as a plaything for the geeky elite. And now the September issue of Vogue, in a 12-page spread, is positioning the product as a high-end style accessory.

At the same time, Google’s business practices are under intense scrutiny, with critics saying the company unfairly blocks rival search engines and advertisers.

Then there is Facebook. Over the last few years, the company has been accused of valuing profits over privacy and the public good. So last month, when its chief, Mark Zuckerberg, announced an effort called Internet.org to expand Web access in the developing world, some contended that the plan was motivated mainly by self-interest.

Also last month, it was reported that Sheryl Sandberg, Facebook’s chief operating officer, sold 2.37 million shares of company stock for $91 million. Eyes rolled when, shortly thereafter, a listing appeared online calling for an intern to work unpaid at her nonprofit foundation. (The organization has since said it will pay its interns.)

If there was a single event this summer that symbolized the perceived excess of Silicon Valley, it was the wedding of Sean Parker, the co-founder of Napster. He threw a multimillion-dollar “Lord of the Rings”-themed wedding in the redwoods of Big Sur, complete with a nine-foot-high cake and custom-made costumes for the attendees.

Evgeny Morozov, author of “To Save Everything, Click Here: The Folly of Technological Solutionism,” said that events like Mr. Parker’s wedding reflect “the kind of attitude that people find repelling.” Although it’s easy to find similar behavior in other sectors, like finance and real estate, its appearance within tech companies can be particularly galling, given the industry’s humanitarian rhetoric, he said.

“Wall Street people don’t claim to be saving the world,” he said. “They are very cynical about what they do: make money and take nice weekends in the Hamptons.” He also noted that many residents of the Bay Area, where much of the tech world is based, are struggling to find jobs and affordable housing as an influx of highly paid tech workers has pushed housing prices skyward.

In May, protesters in San Francisco — upset about rent increases — beat a piñata shaped like one of the Google shuttle buses that takes workers to the company’s headquarters in Mountain View, Calif.

Veterans of the technology world who have seen this pattern before — in the 1990s bubble that preceded the 2000-01 bust — say the outcry over the industry’s excess seems particularly loud this time around.

Maybe that’s at least partly because the tech elite has a much larger platform for bragging, preening and complaining. Popular social media sites like Twitter, Facebook and Tumblr did not exist in the ’90s, after all. Now any ill-advised photographs or posts on those sites are fair game for critics, who can fan the flames of outrage with posts of their own.

Peter Shih, co-founder of a payment site called Celery, for example, recently posted a satirical tirade against San Francisco on a blogging site that included complaints about the city’s homeless population. A storm of protest around the Web ensued; Mr. Shih apologized and the post was removed.

Mr. Morozov thinks that there may be a hint of a silver lining in recent expressions of displeasure over tech executives’ behavior. Until now, he said, the debate about the role of the modern tech industry has largely been limited to topics like online privacy.

“The virtuality of the debate has made it difficult for us to grapple with the consequences of the proliferation of the world outside of this bubble,” he said. “Now that the effects of the tech world invade the physical environment, we have to figure out the necessary philosophical and intellectual framework to deal with it.”

Disruptions: Barbs for Silicon Valley and Some Who Cover It

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Disruptions: The Echo Chamber of Silicon Valley

Jim Wilson/The New York Times Engineers tend to move to the Bay Area to get together with other engineers.

In San Francisco, a bad habit can be the spark that leads to starting a company.

Mike Belshe and Bill Lee were continually running late for meetings and texting each other: “I’ll be there in 5 mins!” So they created Twist, a 10-person start-up in the city’s South of Market neighborhood. The company’s first product is a smartphone app that helps you tell someone you’re late by showing your location on a map. Investors liked the idea enough to give Twist $6 million in venture financing last year.

“We thought there had to be something better than sending a text message,” Mr. Belshe said in a phone interview. “We were trying to tackle that problem of meeting up and making it easier.”

Is Twist a great idea, or are Mr. Belshe and Mr. Lee falling into a local propensity for creating a product for technophile friends rather than the public?

Sometimes, Hollywood screenwriters create scripts filled with inside jokes that only people in Hollywood could appreciate. Sometimes, New York media writers write about other New York media writers. And sometimes, tech entrepreneurs in San Francisco and Silicon Valley to the south create companies best appreciated by other people who live and breathe technology.

Twist is hardly the only start-up whose target audience does not seem to extend far from San Francisco Bay. Among many, there’s BlackJet, which offers “affordable private jet” solutions for people in the area. And there’s Swig, which connects people with local liquor stores that provide home deliveries.

“One of the most important lessons I’ve learned is that we are guilty in the Valley of designing things for ourselves, and we are not the target market,” said Andy Smith, who is the co-author of “The Dragonfly Effect,” a book about marketing, technology and entrepreneurship.

Engineers tend to move to the Bay Area because of the opportunity to get together with other engineers and, just maybe, create a great company, Mr. Smith said. But in a region that has the highest concentration of tech workers in the United States, according to the Bureau of Labor Statistics, the bars, restaurants and other haunts of entrepreneurs can be an echo chamber. The result can be a focus on solutions for mundane problems.

“Some of the start-ups being created are designed for people who have rung the cash register already,” Mr. Smith said. “They are not necessarily bad ideas but they are not the ideas the world needs more.”

As George Packer wrote in The New Yorker last week: “Life inside Silicon Valley can be a paradise (for its winners) of opportunity and reward. Meanwhile, life outside falls further and further behind.” Mr. Packer’s critique started a new round of hand-wringing in the industry among people who worry that they are, well, thinking small.

That’s not to say there aren’t still people thinking about big markets. Elon Musk, the founder of Tesla, which sells electric cars that can cost more than $100,000, said last week at the D: All Things Digital conference in Rancho Palos Verdes, Calif., that he hoped to offer a $30,000 version of the car in the next five years. Mr. Musk is also working on SpaceX, which is already taking cargo to the International Space Station and which he hopes will one day take regular people (or at least regular rich people) into outer space.

But too often, says Jason Pontin, the editor in chief and publisher of MIT Technology Review, these start-ups are solving “fake problems that don’t actually create any value.” Mr. Pontin knows a thing or two about companies that aren’t exactly reaching for the stars. From 1996 to 2002, he was the editor of Red Herring, a magazine in San Francisco that chronicled the region’s dot-com boom and eventual collapse.

Still, some companies that start out with Silicon Valley in mind have shown they can adapt to the rest of society. Take Uber, which began in the San Francisco area as an online service meant to shuffle the affluent around in fancy town cars. As the company has expanded to other cities, it has created less expensive options for customers.

Even the founders of Twist see a future beyond informing their friends that they are five minutes late. Mr. Belshe said Twist planned to offer a version of the app that can give users the “estimated time of arrival for your packages, too.”

Just as Facebook is synonymous with relationships, and Google is synonymous with search, Mr. Belshe said he hoped Twist could be the go-to company for people who want to know the estimated arrival time for any number of things.

“When you’re a start-up, it doesn’t matter if you have it all figured out,” said Mr. Belshe, who has worked for Google and previously sold a software company to Microsoft. “It matters that you have some large opportunities.” Mr. Lee, his co-founder, is also an industry veteran.

And if the company flops, that’s fine, because most start-ups do.

“One of perhaps the most compelling things about Silicon Valley is that it is a place where you can fail, and if you do, you can raise money and try again,” said Mark Leslie, a retired entrepreneur and lecturer at the Stanford Graduate School of Business. “It’s a miraculous place; the streets are lined with gold here.”

E-mail: bilton@nytimes.com

Bits Blog: Lessons for Silicon Valley on Capitol Hill

Drew Angerer for The New York Times Senators Orrin G. Hatch and Charles E. Schumer, who were central to the deal.

There were two stark object lessons for the technology industry in Congress on Tuesday. One showed the power of influence. The other showed the power of the iPhone.

In the Senate Judiciary Committee, the industry scored an enormous victory. It got its way on the immigration bill after Senator Orrin G. Hatch, Republican of Utah, told his fellow committee members that he would not vote for the bill unless they agreed to changes that Silicon Valley pushed for. It reflected an aggressive effort by the industry: companies have vastly expanded their lobbying budgets in Washington and dispatched executives to meet with lawmakers to push for an immigration overhaul. The latest, brashest entrant is an advocacy group led by Mark Zuckerberg, chief executive of Facebook, which raised huge sums of money to sponsor advertisements supporting several critical Republicans who back the immigration bill.

In the Senate Permanent Committee on Investigations, meanwhile, Apple‘s chief executive, Timothy D. Cook, testified. He was questioned by panel members about how Apple’s subsidiaries had helped the company pay as little as one-twentieth of 1 percent in taxes on billions of dollars in income. Congressional investigators earlier this week unveiled a report detailing those tax diversions by Apple subsidiaries, based in Ireland but spanning other regions around the world.

Mr. Cook chose to take a low-key approach to the grilling, explaining that there was a difference in the tax rates that applied to the company’s sales in the United States versus those abroad, where a majority of its sales took place. He insisted that Apple had paid what it owed in the United States.

Lawmakers may have been disarmed by Mr. Cook’s tone. But they also gushed about the shiny toys that his company made, taking pains to praise the iPad, iPhone and MacBook laptop computer by name. “You managed to change the world, which is an incredible legacy for Apple,” said Senator John McCain, Republican of Arizona.

Apple may soon have to think about a legacy in Washington, which it has largely avoided unlike most of its peers in the industry. The company, based in Cupertino, Calif., spends very little in lobbying on Capitol Hill. And it has been largely invisible in even the immigration debate.

So too was another Silicon Valley company that was likewise known for having changed the world: Microsoft. Twenty years ago, it came under Justice Department scrutiny for antitrust violations. And only after that did it hire lobbyists to press its cause in Washington. Today, Microsoft is one of the highest industry spenders in Washington, investing $8 million last year.

Immigration has been one of its top issues lately. On Tuesday, Microsoft’s general counsel, Brad Smith, sent out a congratulatory missive as soon as the immigration bill passed the Judiciary Committee. The bill, Mr. Smith said in his e-mailed statement, “will promote innovation, job creation and economic growth in the U.S. We look forward to supporting this critical bipartisan legislation as it proceeds to the Senate floor for a vote.”

Mr. Smith is among the contributors to Mr. Zuckerberg’s lobby, called Fwd.us. It includes no one from Apple.

Disruptions: New Motto for Silicon Valley: First Security, Then Innovation

The Twitter account of The Associated Press was among many recently hacked.

At Facebook’s headquarters in Palo Alto, Calif., are stark white posters with bright red statements like “Done is better than perfect” and “Move fast and break things.”

These disruptive philosophies embody the spirit not just of Facebook but of Silicon Valley. Yet today, when technology companies have become the prime targets of rogue governments and hackers, the ideologies that drive these companies to provoke could end up disrupting these companies.

Conversely, the signs sitting in security research firms across the country warn, “Carelessness causes security incidents.”

Although technology companies say they take security seriously, protecting their customers seems to come second to announcing new products. Take Twitter, where people’s accounts are frequently hacked. In the last few months alone, this has happened to Burger King, BBC, NPR, The Associated Press and a slew of celebrities and users. In that time, Twitter has proudly announced updates to features on its mobile and desktop apps, introduced a music Web site and redesigned its company blog. But it still hasn’t released two-factor authentication, a security tool used by the rest of the industry to deter hackers.

Although Twitter declined to comment, I’m sure most of the people on the site who have seen their accounts pilfered over the last several years would rather have two-factor authentication than a shiny new Twitter blog.

One solution is a bill crawling through Congress over the last two years, the Cyber Intelligence Sharing and Protection Act, known as Cispa. The bill would make it easy for tech companies to share information about computer security threats with government agencies, helping fortify against cyberattacks.

But privacy groups say that Cispa is not a solution to the problem, and that instead it hands the highly sensitive personal data we want protected to the government.

“It has to be the obligation of these tech companies to build in security from the very beginning before we start moving into solutions about bringing the government into the private sector,” said Leslie Harris, president and chief executive of the Center for Democracy and Technology, a Washington-based advocacy group financed by a broad coalition of technology and telecommunication companies. “You want to see these very innovative companies step up and become the leaders in security solutions first.”

Cispa’s creators and defenders see it differently. They argue that companies are not simply fortifying against a child in his bedroom who is trying to get into their servers for fun. Today’s hackers hail from foreign governments like those in China, Syria and Estonia, and are adept at getting what they want.

Representative Mike Rogers, Republican of Michigan and the chairman of the House Intelligence Committee, who was one of the authors of Cispa, recently said that “our government, our industries and your personal information will be subjected to hundreds of thousands of attempts at hacking” in a single day. “We are in a stealthy cyber war in America. And we’re losing.”

He thinks the government can solve that problem.

Kelsey Knight, director of communications for Mr. Rogers, said in a phone interview that Cispa could stop “90 percent of the current security breaches” that happen today. “Then, in reverse, these companies would be able to share their threat of information and code back to the government and that will add to the list of zeros and ones that we can keep defending against together.”

Ms. Knight noted that start-ups cannot defend themselves against today’s advanced attacks because the cost can be hundreds of thousands of dollars. She said Cispa and other government groups can help.

One thing is clear: today’s tactics are not working.

During the State of the Union address this year, President Obama cited the need to protect “national security” and “privacy” while defending against cyber attacks. The president has also been meeting with chief executives to discuss ways to combat the threat of computer warfare and corporate espionage.

Cispa, now in the Senate, could take months, if not years, if it is to emerge at all from Congress. Until then, advocacy groups believe it falls to the start-ups to put more effort into security.

“The ‘move fast and break things’ philosophy is not a philosophy that has necessarily been good for our privacy,” Ms. Harris said. “I certainly believe that government and companies should be working together, but information sharing is just a very small part of the cyber security puzzle. It’s companies investing the resources to strengthen their own security first.”

Maybe it’s time for companies in Silicon Valley to replace those posters with ones that say, “Move slowly and protect your users.”

E-mail: bilton@nytimes.com

Bits Blog: One on One: Jerry Weissman, Silicon Valley’s Storyteller

Jerry Weissman

Jerry Weissman may produce more revenue than almost any director in history. His big successes haven’t been plays or movies, though. For more than two decades, Mr. Weissman, a former television and stage director, has coached the executives of technology companies on the theater of the initial public offering.

Mr. Weissman’s company, Power Presentations, works with chief executives on the “roadshow,” a major step toward a stock offering. The presentations consist of speeches, slide shows and question-and-answer sessions with prospective investors. Getting that story right builds enthusiasm for a company’s shares, sending initial stock prices higher.

His clients have included Intuit, eBay, Cisco, Dolby, Netflix and most recently Trulia, the real estate Web site. His clients also include executives at established companies like Microsoft, where he helps with other kinds of presentations, like conference speeches and product marketing.

Mr. Weissman, who is based in Burlingame, Calif., has written several books on his craft, the most recent of which is “Winning Strategies for Power Presentations.” I caught up with him recently, in between client meetings.

How different is an I.P.O. pitch from a conference presentation?

I have worked on I.P.O.’s, private placements, product launches, board meetings, keynotes, conference talks and partner meetings. The goal is always the same: Tell a crisp, clean story; make sure your PowerPoint doesn’t become “death by PowerPoint” by cluttering things up or confusing the audience; show poise and confidence; and show you can handle tough questions.

If it’s that easy, how do you stay employed?

They’ve been selling stuff to a different audience, people who want to buy software or computers. They have to rotate the benefit of their product to a different audience. If the audience is potential investors, those people have only two interests: return on investment and risk management.

Most of my clients come at the task of telling their story like engineers, in a logical fashion. But they assign six slides to Tom, eight points from Dick and four items from Harry, and that creates a patchwork of ideas that don’t flow and ideas that don’t match each other. Then they see the audience squirm at what they’ve done, and that raises their discomfort level, which the audience feels. After that, it’s lost.

They need to merge the logic with the art, and that goes back 2,300 years, to Aristotle. Give things a beginning, a middle and an end.

How do you do that?

You set the context by defining who the audience is and what you want to achieve by talking to them. Then you let the ideas flow about what you can say, you brainstorm like crazy without throwing out anything. You distill that into four or five key ideas. Then you put it into a logical flow that is meaningful for what the audience wants.

How long have you been doing this?

It will be 25 years on Sept. 1.

What has changed?

My specialty is I.P.O.’s. The biggest change there is NetRoadshow, which is a Web site where people post a video of their pitch. That means they have to put something tight into the can. Then they go on the road, and if they’re good, it’s 90 percent audience questions about investing. If it’s not good, it’s all about how people didn’t understand what they were talking about. So, I train them to make a video, then I train them for a Q.&A. session that is tougher than anything they’ll face on the road.

The other change is that sometimes people just post slides on the Web, and get on the phone and talk. Either way, the new media means they have to learn to tell stories without making eye contact. It’s even more important that you have a clear story that flows. In the questions, you listen to make sure you understand the key issues. You paraphrase the question to level the playing field for the rest of the audience, and to make sure it addresses the question. And you pitch yourself, so you can end up saying “…and that’s why we are the best.”

How is the I.P.O. market doing?

It is smaller, compared with 10 years ago, but there is lots of other kinds of work. If I’m a bellwether, though, I’d say I have more companies knocking on my door for I.P.O. training this year than last, and more last year than the year before.

Squire Sanders Adds Partner for Sydney and Silicon Valley

Squire Sanders has hired a new partner who will be dual-based in its Sydney and Silicon Valley offices.

Richard Horton was previously a partner in the East Palo Alto, Calif., office of DLA Piper. Dual-qualified in Australia and in the U.S., Horton focuses on intellectual property, venture financings, and mergers and acquisitions related to the technology industry. He frequently advises Australian technology companies moving into Silicon Valley or U.S. tech clients on their Australia deals.

Before joining DLA Piper in 2007, Horton was a partner in the now-closed San Francisco office of Australian firm Minter Ellison. Earlier in his career, he also worked for the firm now known as King & Wood Mallesons and Skadden, Arps, Slate, Meagher & Flom.

Cleveland-based Squire Sanders opened its Sydney office last October. According to its website, the office has five lawyers, including Horton. The firm, which has 1,200 lawyers worldwide, also has a Perth office in Australia.

Duane Morris Opens Silicon Valley Office

Karineh Khachatourian, Duane Morris partner
Image: courtesy photo

Duane Morris has opened a new office in Palo Alto, Calif., making for the firm's fifth outpost in California.

The new location will focus, to start, on intellectual property litigation. To that end, the firm hired K&L Gates partner Karineh Khachatourian and associate Patrick S. Salceda.

Duane Morris already has offices in San Francisco, Los Angeles, San Diego and Truckee, Calif., which is near Lake Tahoe. The firm said the Palo Alto office will give Duane Morris attorneys more efficient and direct access to clients across the high-tech hub that is the Silicon Valley. Attorneys in the firm's existing four offices will help to service clients in the Palo Alto location.

The firm said Palo Alto is a natural fit for Duane Morris' work in patent litigation and prosecution, trademarks, copyrights, venture capital, private equity and related commercial litigation.

The intellectual property practice, particularly in California, has been a strategic growth target for Duane Morris recently.

L. Norwood "Woody" Jameson, chairman of the practice, said in a statement that the launch in Palo Alto was a direct response to client feedback. He said the IP practice leadership is making a "substantial commitment" to the West Coast with a priority on hiring in Palo Alto and other California offices.

Duane Morris Chairman John Soroko told The Legal Intelligencer the firm wanted to get closer to the types of clients that fall into the firm's IP "sweet spot," which he said was in the computer, high-tech and telecommunications space. Khachatourian said she would be bringing clients with her to Duane Morris, including video game makers, video game console makers and software manufacturers.

Duane Morris changed the leadership of the IP practice in early 2012. Lewis F. Gould Jr. stepped down and Atlanta-based Jameson took his place.

Jameson's practice has a strong emphasis on patent litigation for electronic engineering companies, making the firm's goals in Palo Alto and San Francisco a natural evolution for the practice, Soroko said.

"Companies are being much more circumspect about where they are willing to invest dollars in litigation efforts, but things that continue to be important to our clients are issues that surround intellectual property," Soroko said.

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Stradling Yocca Snags Sony Counsel for Silicon Beach Office

By Leigh Jones All Articles 

The National Law Journal

November 20, 2012

Stradling Yocca's Stephen Kong

Stradling Yocca Carlson & Rauth has added Stephen Kong, former in-house counsel at Sony Computer Entertainment America LLC, as a shareholder in its Santa Monica, Calif., office.

Kong, who was senior corporate counsel at the Sony division, will focus on technology transactions and intellectual property licensing. While at Sony, he was lead attorney for the research and development and strategic business groups responsible for Sony PlayStation matters in North America and Latin America.

Stradling Yocca, with about 110 attorneys, is one of a number of firms boosting their presence in the so-called "Silicon Beach" region, where high-tech companies have expanded recently. Google Inc., Hulu LLC and Demand Media Inc. have offices in the Santa Monica area. A convergence of technology and entertainment is driving much of the growth, which includes expansion in Los Angeles.

Last month, LeClairRyan added five intellectual property and litigation lawyers to its Los Angeles office. In July, Cooley opened an office with four partners. Also in October, Thompson & Knight launched an L.A. practice. Other firms that have added attorneys in the area include Pepper Hamilton; Winston & Strawn; and Foley & Mansfield. Last year, Dallas litigation firm McKool Smith debuted an L.A. office.

"Stephen makes a terrific addition to our growing team in Santa Monica," Stradling Yocca director David Lafitte said in a press release.

Kong received his juris doctor degree from Emory University School of Law in 1995.

In Silicon Valley, Perks Now Begin at Home

Today, Evernote’s 250 employees — every full-time worker, from receptionist to top executive — have their homes cleaned twice a month, free.

It is the latest innovation from Silicon Valley: the employee perk is moving from the office to the home. Facebook gives new parents $4,000 in spending money. Stanford School of Medicine is piloting a project to provide doctors with housecleaning and in-home dinner delivery. Genentech offers take-home dinners and helps employees find last-minute baby sitters when a child is too sick to go to school.

These kinds of benefits are a departure from the upscale cafeteria meals, massages and other services intended to keep employees happy and productive while at work. And the goal is not just to reduce stress for employees, but for their families, too. If the companies succeed, the thinking goes, they will minimize distractions and sources of tension that can inhibit focus and creativity.

Now that technology has allowed work to bleed into home life, it seems that companies are trying to address the impact of home life on work.

There is, of course, the possibility that relieving people of chores at home will simply free them up to work more. But David Lewin, a compensation expert and management professor at the University of California, Los Angeles, said he viewed the perks as part of a growing effort by American business to reward people with time and peace of mind instead of more traditional financial tools, like stock options and bonuses.

“They’re trying to get at people’s larger lives and sanity,” Mr. Lewin said. “You might call it the bang for the nonbuck.”

At Deloitte, the consulting firm, employees can get a backup care worker if an aging parent or grandparent needs help. The company subsidizes personal trainers and nutritionists, and offers round-the-clock counseling service for help with issues like marital strife and infertility. Deloitte executives, and other experts, said they believe that such benefits were likely to spread.

“The workplace was built on the assumption that there was somebody at home dealing with the home front,” said Anne Weisberg, a longtime human resources executive who helped write a book about new kinds of workplace policies.

Not only is that no longer the case, she said, but the work-life pressures seem to be building. “There’s a greater awareness that we’re pushing things to the limit and something’s got to give,” she said.

Hannah Valantine, a cardiologist, professor and associate dean at the Stanford School of Medicine, said the university’s experiment with helping out at home was part of a broader effort to support doctors, given their hyperkinetic pace of life.

“If you’re coming home at the end of the day exhausted and you have a pile of cleaning to do, it’s the kind of things that leads rapidly to burnout, and burned-out physicians don’t give the best care,” Dr. Valantine said. “We’re trying to send a very strong message that the institution cares about you and about your life.”

Some compensation experts argue these types of perks ultimately do little to attract employees and might obscure more fundamental problems at companies that have trouble retaining talent.

That is a challenge Stanford owns up to, given the brain drain suffered by academic hospitals, where relentless demands include treating patients, writing grants, doing research and traveling to conferences.

So 18 months ago, Stanford hired a consulting firm called Jump Associates to better understand why so many academic doctors feel burned out. The company videotaped them from the time they woke up, through the workday and until they and their families went to sleep.

In one video, a kidney specialist told a story that shocked the researchers: while she was on maternity leave, she bought a minivan to ferry the children of friends and neighbors to school and sports practices.

That way, the doctor explained, she would be able to ask for favors when she returned to work — and that, in theory, would enable her to juggle the dual demands of work and family.

Firms Beef Up Tax Practices in Silicon Valley as IRS Increases Scrutiny of IP Assets

If there was any doubt about the value of patents to high-tech companies, Apple Inc.'s recent $1 billion victory over Samsung Electronics erased it.

Now the Internal Revenue Service wants a share of the action. The agency is beefing up staff, both nationally and in the San Francisco Bay Area, to look more closely than ever at how high-tech companies price intellectual property transactions involving their overseas subsidiaries.

And it's cracking down on tech companies in Silicon Valley that it suspects are dodging taxes on the profits their IP generates. Companies, however, aren't opening their wallets. They're fighting back, creating a lot more work for both tax planners and litigators. Tax lawyers say they're trying to help clients stay out of tax trouble, advising them to either work with the IRS before there's a dispute, or make sure they have their facts ready when the tax man arrives.

The IRS has made no secret of the fact that it's increasingly focused on what's called transfer pricing, or how a multinational company allocates income and expenses among itself and its foreign subsidiaries for tax purposes. Companies have long used transfer pricing to shift assets to countries with lower corporate tax rates, such as Ireland.

"There's been a substantial increase in controversy work, not just in Silicon Valley, but nationwide," said Kenneth Clark, who chairs Fenwick & West's tax litigation group and successfully defended Xilinx Inc. in one of the biggest transfer pricing cases in recent years. "We're not only seeing more cases, but also a greater degree of intensity in questioning by the IRS. From the taxpayers' perspective, that can mean a tremendous amount of additional work."

Now in addition to manufactured goods, the IRS is homing in on the transfer pricing of what it calls "intangible" intellectual property. Taxing an intangible asset like a patent, however, is no easy task, lawyers said.

There's much room for subjective interpretation about issues such as a patent's actual market value, and who generates more profit from the patent: the parent company in the U.S. where the idea was patented, or the factory in a foreign country that actually makes the products that the parent company sells?

"You end up having a battle over who is adding value," said John Ryan, a partner at Bingham McCutchen in Palo Alto who focuses on tax planning and audit defense. "And reasonable minds differ."

Several IP-heavy tech companies in Silicon Valley recently disclosed transfer pricing disputes with the IRS in their Securities and Exchange Commission filings, including Hewlett-Packard Co., Adobe Systems Inc., Cadence Design Systems Inc., Juniper Networks Inc. and Yahoo Inc., and the potential liabilities are substantial.

Last year, the IRS told Juniper Networks that it owes nearly $900 million in additional taxes based on cost-sharing arrangements related to the licensing of "intangibles," after auditing the company's 2004 to 2006 tax returns. The Sunnyvale, Calif.-based maker of network infrastructure equipment is fighting the tax bill and said in a recent SEC filing that the IRS' position is "inconsistent with applicable tax laws, judicial precedent and existing Treasury regulations."