Seeking a bit of white space

Earnings announcement, board meetings, stockholder meeting and the continued melt down of global economic markets. All in all, it’s been a stressful few weeks. So, when a few friends offered the chance for a weekend of camping and hiking in Yosemite Valley, I happily accepted.

Yosemite Valley is always wonderful. But at this time of year, it is at its most beautiful. The leaves of the black oaks have turned shades varying from crimson to mustard and color the air with every breeze. In the background, the majestic icons of the valley – El Cap, Half Dome, Glacier Point and Royal Arches, all watch silently. I’m still astounded to meet residents of California who have never visited this sublime geologic wonder.

The hike itself was grueling. There was no trail to follow and we had to move at a good pace to avoid navigating in the dark – or worse yet, being included in the next edition of this.

Our starting point was Olmstead Point off of Tioga Road. From there we descended (and more than occasionally – stumbled) down Tenaya Canyon to the valley floor. Along the more than ten mile route we discovered the engine of a plane that had crashed in the late 1950s; had an encounter (thankfully, a friendly one) with a large black bear; enjoyed the adrenaline of a few rappels and the refreshment of a chilly swim in the Tenaya river. In this environment, it is impossible to think about work. Or, the economy.

Now, at the office a week later, my legs remain in pain and the blisters on my feet have not yet healed. But each time I experience a moment of stress, I reach down and touch my still aching legs. When I do, I’m transported back to Yosemite and find a moment of repose.

(Photographs courtesy of Rene Schaub)


Filed under Personal

Computer Professional Exemption

Last month, as part of the resolution of the impasse over the California state budget, AB10 was passed and signed into law by Governor Schwarzenegger. This piece of legislation amends California Labor Code Section 515.5, known as the “Computer Professional” exemption to state overtime laws.

Prior to this amendment, Section 515.5 required that “computer professionals” receive at least $36 per hour in order to be exempt from overtime payments. While the original legislation may have had a positive intent, the result was not because in order to qualify for this exemption computer professionals were required to track their hours to verify that they received the hourly minimum.

AB10 was the subject of a great deal of lobbying prior to its passage, with the plaintiff’s bar arguing that it would be the first step in the elimination of all hourly wage requirements. Others claimed the existing legislation was necessary to ensure that computer professionals were paid a living wage. The reality is very different.

AB10 is not about paying fair wages. Qualified computer engineers remain in high demand. This market demand is reflected in the fact that most computer professionals receive an annual salary that far exceeds the $75,000 minimum level set forth in Sec. 515.5 and includes stock options, benefits and other perquisites. And it should be noted that California’s minimum level remains more than three times what is required in other states where the federal standard applies.

AB10 is important to keeping jobs in California. Technology companies consistently rank among the top employers and best places to work in the state. But, we are in an era of increasing globalization where employment opportunities are moving to other states and countries. Some of the most attractive and portable jobs are those of the computer industry. The passage of AB10 brings California law more in line with other states by making the computer professional exemption a true exemption that can be relied on by companies. It will also help reduce the tsunami of wage hour class actions that arose under the previous legislation which resulted in companies paying litigation costs rather than investing in job creation.

In a global economy, California can not afford to be an island if it desires to keep taxpaying jobs for its citizens. Congratulations to the governor and California legislature. AB10 is a positive thing for its technology employers and employees, and for California.


Filed under Personal

Just one more thing.

I promise, I do have other subjects to write about; however, immediately after my last blog we received some additional news of interest concerning the NetApp litigation.

After NetApp filed its lawsuit to halt adoption of Sun’s open source ZFS technology, we responded by filing reexamination requests with the PTO citing the extensive amount of highly relevant prior art that was not disclosed or considered when NetApp originally filed its patents. The patent office clearly agreed with the relevance of this prior art, as demonstrated by its rejection of the claims across all of the reexaminations. Of these patents, three have been described by NetApp as “core” (US Patent Nos. 6,857,001; 6,892,211; and 5,819,292). Here’s the current status of each of them:

NetApp Patent No. 6,857,001 – The PTO rejected all 63 claims of the patent based on 10 prior art references provided by Sun. In addition, the trial court has agreed to remove that patent from the litigation for now pending the final reexamination by the PTO.

NetApp Patent No. 6,892,211 – The PTO rejected all 24 claims of the patent based on 12 prior art references provided by Sun. There is currently a request pending before the trial judge to stay this patent from the litigation as well.

NetApp Patent No. 5,819,292 – And late last week, we were informed that the PTO has rejected all of the asserted claims of this patent relying on at least two separate prior art references out of the many provided by Sun. (The examiner felt that to consider the other references would be “redundant”.)

Some may recall that the ‘292 (“WAFL” technology) patent was what NetApp’s founder, David Hitz, originally highlighted on his blog as being innovative and infringed by ZFS. However, what this litigation is proving is what we have known all along – ZFS is a fundamentally different, game changing technology.

It’s the same thing we hear from our customers.


Filed under Personal

More on the NetApp litigation

I recently read Judge Laporte’s Order Construing Claims in the NetApp v. Sun litigation. Judge Laporte is the United States Magistrate Judge who is hearing this case in the Federal Court for the Northern District of California. Reading the order was again a reminder of the breadth and diversity of cases that judges are called to consider. These include everything from antitrust, personal injury and employment lawsuits, to cases involving conflicts over ERISA and some even more unique disputes.

Which makes it all the more impressive when a judge is also able to understand and render a decision relating to highly complex technologies in a patent case as part of a Markman hearing. For those who don’t practice in this area, a Markman hearing (taking its name from the case of Markman v. Westview Instruments, Inc.) is a pre-trial procedure in which each party presents briefs, tutorials and expert witness testimony to establish the meaning of key terms in disputed patents. Aside from the actual trial, the Markman hearing is the most important part of a patent infringement litigation.

On August 27, 2008, the Markman hearing was held before Judge Laporte. In dispute were fourteen phrases in seven patents (four asserted by Sun and three by NetApp) that required the court to determine the meaning of terms like “Domain Name”, “Non-volatile Storage Means” and “Root Inode”, among others. Given the complexity, we were impressed when only two weeks later, the judge issued her order.

And, we were very pleased.

In summary, the court agreed with Sun’s interpretation on six of the disputed terms (two of which the court adopted with slight modification) and with NetApp on one. As to the remaining terms, the court either formulated its own interpretation or requested that the parties propose a further construction (i.e. definition). If you want to read the Order from the Markman hearing you can find it here.

Most significantly, the Court found each of the asserted claims in NetApp’s 7,200,715 patent relating to RAID technology to be “indefinite” – meaning that someone with experience in this area of technology could not understand the limits of the claimed invention. With regard to NetApp’s ‘715 patent, the court agreed with Sun’s position that the claims of the patent are flatly inconsistent with and impossible under the teaching of the patent specification. In effect, unless NetApp appeals and this finding is reversed, the ‘715 patent is effectively invalidated in this case and against others in the future.

In addition, the Court’s findings on the terms “server identification data”, “domain name”, “portion of a communication” “element of a communication” and “completing a write operation within a local processing node” further strengthen our position that the processors, network interface and systems management software used across NetApp’s product line infringe Sun’s patents.

Meanwhile ZFS and OpenStorage continue to gain momentum.


Filed under Personal

To Err is Human, To “Arr” is Pirate.

Last week, we celebrated “International Talk Like a Pirate Day”. It was a great way for all of us to release a little stress and channel our “inner buccaneer”. But we took it a bit farther than most as we not only spoke like pirates, but dressed like them as well.

As part of the festivities, we collected donations (thanks everyone) for 826 Valencia. This is a non-profit organization in San Francisco that provides tutoring and workshops to help local students (ages 8-18) develop their reading and writing skills. And, it’s operated out of the back of a pirate supply shop!

The most enjoyable moment of the day was my first morning meeting. It was with an attorney from Singapore who joined Sun about six months ago. Prior to Sun, he had worked with two prestigious U.K. law firms and also held a number of other significant roles, including as general counsel. It was the first time I had the opportunity to speak with him and we met over a cup of coffee in the campus coffee shop. Toward the end of our conversation, I asked how Sun compared to other places he had worked. He paused, and then in a thoughtful and deliberate response (complete with British accent) replied: “I’ve observed that Sun has a culture that is very different from other places where I have worked”.

Now mind you, at the time he spoke these words, he was fully outfitted as a pirate and sitting in a booth in a busy cafeteria. Across the table from him, I was similarly attired (including wig, earing and sword).

I laughed about it the entire day.


Filed under Personal

Reg FD update

Almost two years ago, our CEO and I had a discussion in which he challenged some of the legal restrictions placed on him concerning blogging about Sun’s financial results and more generally about use of Sun’s IR website. He very convincingly pointed out that these restrictions were inconsistent with the objectives of Reg FD. That conversation resulted in a blog, an unexpected response from SEC Commissioner Cox and an invitation for several of us to meet in Washington with members of the SEC.

It was my first time at that institution and my visit had a Capraesque feel to it. But, the attorneys on the Commissioner’s team were intelligent, engaged and receptive. Clearly they listened to us and many other reporting companies as indicated by the SEC’s recently released interpretive guidance on the use of company websites under the Securities Exchange Act of 1934. You can find a PDF of it here.

When Reg FD was first adopted eight years ago, the SEC took the position that website disclosures alone would not be viewed as meeting the public disclosure requirements of the regulation. Since then the U.S. has seen explosive growth of internet access. With it’s latest release, the SEC has recognized this growth by making clear that depending on the circumstances website disclosures can meet the public disclosure requirements of Reg FD.

While the release does not provide much in the way of objective standards, it is not surprising that the SEC was reluctant to provide a “bright-line” test given the differences in size, market following and web infrastructure among reporting companies. However, absent that clarity, the Commission did give pragmatic guidance on factors a company should evaluate in considering whether it’s use of website disclosures are Reg FD complaint. These include the extent to which a company :

-Informs the market of the company’s website practices;

-Establishes a pattern of regular website disclosures;

-Makes the disclosures prominent;

-Takes steps to increase market and media attention to the website;

-Makes the website accessible through RSS feeds and similar technologies;

-Keeps the website current and accurate; and

-Uses the website as a predominant method for public disclosure.

(The nature of the information disclosed is obviously a significant factor as well.)

It was also nice to see that we have already incorporated much of this guidance in Sun’s disclosure process and website. To see what it looks like go here.


Filed under Personal

Finding Value

Years ago, I worked for an established New York based law firm. I was assigned to support one of our major clients, a large international pharmaceutical company. As a junior associate I grappled with billing – trying to juggle the minimal value of my limited legal experience with the pressure of meeting the firm’s billable hour requirements. I shared this with the senior partner on the account and, to my surprise, he told me to bill for all of my time and that he would ensure that the firm received “compensation commensurate with the value the firm provided to the client”.

At the time, I wasn’t confident enough to ask how this was accomplished. But I later found out that this partner had a long standing relationship with the client’s CEO. At the end of each year, the two of them would meet over a nice dinner and bottle of wine and review the work that the firm had done the previous year. Among other things, they would discuss the amount and type of legal support the firm had provided and the value of that work to the client. At the end of the meal, they would agree on an annual fee for the following year – usually memorialized on a napkin. Some years the fee increased; in others, it decreased.

I was thinking of this story while attending a meeting with lawyers from a number of San Francisco Bay Area companies and law firms. Under the aegis of the ACC we were together to discuss the devolution of legal services from the halcyon days described above to the present where law firms optimize for profits per partner while in-house legal departments focus on efficiency and value. It was a lively discussion and, although there wasn’t a clear solution, some ideas resonated with me.

1. Legal Education – Law schools (especially in the U.S.) remain primarily focused on theory, rather than practice. As a result, a significant expense for law firms is attributable to providing practical training to recent law school graduates. In turn, this expense is passed on to clients in the form of higher hourly fees. Our legal education system needs to provide better practical training. In this respect it should mirror the residency requirements of medical schools or legal programs in other countries. For example, in Germany, a practice residency is already incorporated in the law school curriculum. In addition, law schools need to recognize that the “legal profession” is also a business for providing legal services. To be successful, lawyers need to be trained in how to manage a competitive business enterprise. Interestingly, future members of our profession already understand this and are focusing on the issue.

2. Legal Media – As a public company, Sun provides a very transparent view into all aspects of our business operations. This transparency drives increased competition in the marketplace for our products and services. Obviously, law firms aren’t required to provide this type of information. However, the limited information that is available focuses on the wrong metrics. Legal media need to shift the focus from metrics like profits per partner to those metrics that are valued by clients. When legal periodicals begin to report firm operating expenses, average cost per billable hour and similar metrics, the legal world will change very quickly – and for the better. Law firms understandably dislike RFPs. In-house legal departments feel the same. Unfortunately, there is no other mechanism for clients (i.e. customers) to ensure that they are getting cost-effective value.

3. Law Firms – Law firms need to better understand that they are both licensed professionals and also employees of a business enterprise in an increasingly competitive (and global) market. This means they need to understand every component of their operating expense and business model. What is the cost of attorney turnover in the firm? What are its core v. non-core technical strengths? Can the firm manage sub-contractors (i.e. other legal service providers) to provide more cost effective services to clients in non-core areas? Does the firm fully understand its customers and does it tailor its services to the customer’s specific needs? (In this regard, I note that I have never had a firm propose a non-standard billing relationship for a specific matter. Instead, I’ve always had to request it.)

4. In-House Legal Departments – We need stop complaining and be part of the solution. This includes not just considering, but engaging firms that provide alternatives to the traditional legal services model. (Some examples – Axiom, Paragon Legal and the recently announced Virtual Law Partners). We also need to be more willing to retain small to mid-sized firms and firms in other geographical regions. Above all else, we need to more actively share information about attorneys and firms that deliver the value that we need as consumers of legal services.

If you want to be part of the dialog, contact the ACC for more details.


Filed under Personal