On this week’s episode of Lawline's Lawyers Who Lead podcast, Sigalle discusses the concept of leading by seeing around corners with James Gatto, Partner at Sheppard Mullin's Intellectual Property Practice Group and leader of the firm's Blockchain & Fintech Team, Open Source Team, and Social Media and Games Team. Listen to the full interview or read highlights of the interview below. Transcribed answers were edited for readability.
I'd like to say that it was really well thought out, but it wasn't. I started thinking about different options of what I wanted to do with my engineering degree and law was one of them. I fell into it. I never worked as an engineer. I was debating a number of different things and decided to go into law.
And I'd heard about patent law at the time. Back then, patent law was going through a pretty significant evolution in the US. They had created a new court of appeals for the federal circuit and patents were really starting to become more valuable. And I always was interested in the intersection of law and technology. It really captivated me and I jumped in with both feet.
I had applied to some law schools and was fortunate enough to get into Georgetown. And then when the reality of what it was going to cost to set in, I started looking at different alternatives.
And back then the patent office had a program where if you worked as a patent examiner and were going to law school at night, they would pay for some of your law school. It sounded intriguing to be a patent examiner. It sounded even more intriguing that they were going to actually pay for some of my law school.
I went that route. And so when I say I fell into it, that was really the start. Then I really liked it, stayed there for two years and then went for the balance of law school, worked at a patent boutique. And have been doing patent and other IP work and technology work ever since.
It was a bit of an evolution. You'd asked earlier about games. I'd been doing work in the game space for a long time before that. And a big part of when I got into games, it was again, when games changed the business model from selling package software in stores for consoles to online games, with downloadable content, virtual economies.
I was very fascinated by that business model, and it definitely created a lot of different legal issues. I was doing a lot of work with game companies on that. So I'd gotten introduced to virtual currency through that and some of the issues, and those were a lot easier because within a game it's like a closed loop currency. It keeps the legal issues easier to deal with.
So fast forward to 2012, one of my clients did some work in a game related space. He actually became general counsel of the Bitcoin foundation. He had gotten me involved and I had read about and heard of Bitcoin and had done some reading on it. But I really, based on his outreach, really started digging into it, started going to a lot of the industry conferences back then, which then was primarily just Bitcoin in 2013-14, Ethereum came along and then a million others.
So I had been doing work and really studying that space and the different business models and technology, going back to that timeframe. And fortuitously a bit fell into it cause I had this client, but I've always just looked for literature. I spend at least an hour a day, if not more, just reading about technology and business trends with technology companies, that's really how it really happens and continues to happen.
I think the primary answer is that I really try to dig into the technology, right? So when there's new technology, there's always hype and there's a lot of misinformation out there. And a lot of people repeat what they hear in the news and don't dig in. I dig in. I try to formulate an assessment, sometimes I'm right, sometimes I'm wrong.
I think back like in the early days of the internet, like in 94, even before it really was full-scale commercialized. I really studied that. I'm like this is going to transform the world and everyone else, not everyone else, but a lot of people were, this is a fad. Why would I need this?
And blockchain is very similar. A lot of people don't understand technology. There's bad things that are happening by bad people that always happen with new technology, but I've dug in and in my belief, the way that I look at this is that the internet is an information protocol. It's a way to move information around the world.
Blockchain is a transaction protocol. It's a way, in a decentralized way, to validate processes and store transactions. And so I think that the underlying technology is sound. I think there's a lot of experimentation going on right now. The early pirates are always trying to make a quick buck and it gives a black eye to the industry to get started.
The regulators have been a little slow to regulate. They're trying to understand it. They don't want to kill it. And it's a difficult thing because they're trying to fit a square peg in a round hole. So I look at all of that and say, is this something that has real value, notwithstanding the short-term issues? And if so, it's something I'm going to lean into and roll my sleeves up and dig in and work with companies on.
I learned pretty early on as a lawyer, anytime there's change in technology or business models, it's good for lawyers. There's always going to be IP work, there's new tech regulatory issues. And so I've always tried to spot the trends, see what's new, kind of get out and study the issues before others and try to build a practice around that. And that's largely what I've done for the last 30 years.
It really varies, but like with Bitcoin, you gotta start with the white paper. A lot of people that play in cryptocurrency, never read the Bitcoin white paper. I don't know how you can do that. It's almost like reading the instruction manual.
So that's part of it. I listen to a lot of podcasts. I find a lot of publishers that cover the topic well. Not the hype part, but the technical part, the business part. I go to a ton of industry conferences and just speak to experts and just have conversations with people who I think are really smart. And listen to them. And you hear different opinions, but by talking to a lot of smart people and processing it, you can formulate your own version of the truth around this and come to a well-reasoned conclusion and not just read the headlines.
I think fashion is going to become even more important with blockchain and metaverses. It's really cool to see what's happening in the digital fashion space. Companies like Nike, they bought a digital sneaker company. You've seen a lot of the very high end brands are selling NFT outfits and stuff. Many of them will be ultimately usable across different platforms.
Just like in the real world, we want to portray an image, whether it's high-fashion or whatever the image is. In the real world, people will do that in virtual worlds, metaverses, etc. And the cool thing is that for many of these metaverses, people will have different personas in different metaverses.
If you go to one, that's more of a professional type environment where you're engaging with coworkers or clients, think of it like maybe a LinkedIn type version of a metaverse. As the lawyer, you have the buttoned up suit, and then you go into the more fun places and you're doing something a little more chill and cool and casual, and you may have your clubbing outfit.
So it's just going to replicate real life. But that is going to be a huge part of the market because with every avatar-based platform, people are not going to show up with a generic avatar. People are going to dress and people are going to accessorize. When you combine that with photo realistic avatars and real-time animation of avatars, that will mimic your eye, head, mouth movement, the experience is going to become so much better than what it's ever been.
And the brands that are seeing that and are jumping in early buying land in some of the metaverses, they're exploring now, but they're learning what works and what doesn't work and it's really cool to see and work with some of those companies.
I think the early days of virtual worlds was a cool experiment. Technology was clunky, but when you fast forward to where we are now, the reason a lot of these metaverses are really taking off these technologies have all come together and have moved forward. You have AR and VR, which are much more ready for prime time than they've ever been.
The avatars and the fashion, we talked about. The ability to buy land and then you build on it and you do stuff with it. This builder economy is becoming much more prevalent. Like throughout society, you look at even kids with roadblocks and Minecraft. All of these trends have come together. And then powered on the backend by blockchain based management of assets, like land and your digital fashion and your avatars and whatever else.
We're at this point in time where the technologies and the societal adoption and use of them have come together. And that's why we're seeing this huge inflection.
So whenever anyone talks about metaverses these days, they reference Snow Crash, Neil Stevenson's novel, and then Ready Player One, which ultimately became a movie. And I think we always think about things as oh that's so futuristic, but like a lot of the elements are here. Whether we'll get to that full single metaverse where all the meta verses are connected, that may happen at some point.
I remember like Dick Tracy's old communicator watch in the comics back in the sixties and seventies, people like, oh, that's crazy. And we all have Apple watches now. We've got self-driving cars, flying cars soon. So I think all of the things that start out, so futuristic and science fiction, we end up moving in that direction in so many ways.
I believe that it's taken a while to get where we are. I really think we're going to see the next leg up very soon. There's a lot of big companies like snap. So snap is doing a lot with AR. There's more companies building AR headsets. Apple has been investing in AR for a long time. Tim Cook has said, it's going to be big, I think, in the next year or so, we're going to see a lot more devices and applications and integration with metaverses and apart from that. And I think it's going to really take off.
I think when you look at AR versus VR, I think they're both great. And there's many advantages that each of the technologies have, but at a very high level and simplistic view with AR, if you have a set of AR glasses, like you can be walking down the street and just augmenting your day-to-day experience.
Whereas for the most part with VR, you've got to put a headset on and you're in a virtual environment. You mostly can't be walking around. So it's time you're taking to get some really cool experiences, but normally will be separate and apart from what you're doing in your day-to-day life.
Now, there are VR for enterprise. We're working with some companies that are making really big investments in that space for training, onboarding, simulation, collaboration, and other experiences that make it really powerful. That'll be part of our life, but again, you still have to like, do that. And then ultimately, what Microsoft has with HoloLens is really more of what you hear is like an XR device, which is a mashup of the two.
If you could have the AR/VR combined and use whatever you want at the right time, that will be the ultimate, I think, use of those techniques.
I think it's critical. I think to really fully understand, you have to experience it and get an appreciation of what's happening.
You also have to understand the backend. That's where we work a lot with clients to have demos on what's going on in the backend. And I think it's really hard to provide strategic legal advice if you don't have your arms wrapped around the technology, the business model, and all of that.
There's a lot of different experiences there. VR is the visual part. Now there's 3D spatial audio, and you get some really cool audio visual experiences, but there's so much more technology that's being developed for the rest of the senses. So there's like gloves or other sensors where literally we could, if we met in VR, we could shake hands and it would feel like we're shaking hands you'll have that tactile experience. There was a client I did work with and they were probably too early in what they did.
But I think you're going to see a resurgence of this as it was a company called Scent Sciences and they had these little devices with these oil canisters, and it was software that would basically create a scent that would be synced to what you're seeing in that case on a computer screen. What they were doing, they had e-commerce play where they were trying to work with companies like Yankee Candle, where you could shop online.
But as we all know, when you're buying a candle, it's not about the color. It's about the scent. So Yankee Candle would be a great example of how you could have scent enable an application. But I think you'll see that over time as well. And so the level of how immersive this technology can become, the technologies are there. They need to be refined for commercial purposes, but it's pretty exciting to see some of the things that are on the drawing board for some of the companies we're working with.
Sometimes we can, sometimes we can't. The legal aspect is really not the driver of that. Sometimes with AR, and AR has been around for a long time, you need to develop your piece of the technology, but you need the underlying technology. You need sufficient processing power, you need glasses, you need the little displays, you know, and all these pieces of technology are being worked on.
But many times when you're building a piece of technology, that's dependent on other technologies. They all have to come together and be ready for prime time at the same time. And there has to be a consumer and business acceptance of it. And so there's just a lot of things that have to come together and sometimes it works and sometimes you have to go back to the drawing board or sometimes you have to iterate what you're doing and scale it down and do a piece of it and then build over time as these other pieces get put into place.
You look at like other areas like cars, for example, like car companies, constantly, these concept cars that are futuristic and most of them not production ready. But there's a lot of industries where companies will map out the future. And then the question is what's the timeline to actually get there with the commercial product? That's the challenge, right?
It's case by case. I'd say the biggest challenge is when a company comes to us and they're like a platform that can be used across many industries. And you could certainly pursue all the industries at once. Or you can pick one or two and really get entrenched. And that's a big decision from a business perspective. Which way do you go?
That is an example of that. That's where even when you have the technology today and it's usable, but you have choices on where to deploy it. That's an easier choice than, okay. Here's technology, it's not ready today. How long do we keep pushing this and hoping we can get to revenue, right? So sometimes you have to do the minimally viable product and get started with something to get the concept out in the market, and then iterate as there's more acceptance, user feedback, and figure out what the market really wants.
That's a big area we see a lot of times with technology is you can build cool technology, but if you're not solving a problem or users are like, yeah, that's cool, but I'm not going to pay money for it. You're not going to have a business. So you have to look at all those factors.
I think it provides an immersive way to experience social communication, right? When you think about where we are today with social media, it's become pervasive and even my mom uses social media and she's not a computer person.
I think that everyone wants to be connected with people, friends, family, business people, whatever. And it's a limiting experience, right? It's text-based for the most part with pictures here and there, but when you take it to that next level of communication, I really think at the core of it, it's a much greater, enhanced social experience with commerce wrapped around it.
We've seen some of the online virtual concerts that have happened have been pretty successful. I think you're going to see a lot of like music venues and entertainment and social experiences like that in metaverses, and so I think it's just a way bring people together in what we're already doing with social media in a much more immersive and heightened at heightens the experiential value of what we're doing.
And as we were touching on earlier, you can post your selfie, pictures and stuff, but when you have an avatar and you're immersed in that experience with other people, and you've got digital fashion on and you can communicate and be virtually present, but like your avatars can be facing each other. And if you get facial expressions, that level of communication is just so much, so far beyond where we are right now. And that's all pretty much feasible.
The way I describe it, it's seeing around corners. If you were working in cutting edge areas of technology and new business models, things aren't all mapped out from a legal perspective. And it really requires thinking through what existing laws apply because technology always leads to regulatory issues and legislative changes. And so technology gets out there, pushes the envelope and then regulators figure out what needs to be tweaked based on what's working and what's not working. So you have to anticipate that to some extent.
And I think we're seeing that with NFTs right now. People are throwing so many things out and we've been telling people for years about some of the problems, what you should avoid. And we're now seeing a whole wave of lawsuits. That is a textbook example of what not to do. And so it's that concept of figuring out how you can work with companies that want to push the envelope, do it in a way that's legally compliant, and then have them be positioned for the future as well.
We'll take a simple example. Every client that's doing something online needs terms of service. And for the most part, the terms of service is a legal document, but most users don't read them. Unless they ever get into a lawsuit and their lawyer reads it to them. So the document is there in large part, if it's done properly, it protects the company. And so if you look at what could go wrong with whatever that business model is and how users might misunderstand something or how they might be upset and want to make a claim against the company.
Part of it is thinking through, okay, how can we structure the terms of service in a way that will minimize all that. Be fair to users, you always want to be fair to users. You want to be clear on your disclosures and you want your terms of service to be consistent with what you're telling people in a marketing message, but you want to protect yourself legally. And we've seen many cases where people had terms of service that weren't well done and they got sued. And when they relied on the terms of service, it didn't really help the company much. So you try to avoid that.
Another bucket is when you are doing partnerships with other companies and doing a partnership agreement. Okay, here's the deal today. But when you think through, okay, where is this going down the road? We'll take IP for example. So each company comes to the party with their own IP and you can say, I own mine. You own yours. But over time, there's going to be some jointly developed IP. How do you deal with that down the road? Both when the partnership is still going on and when it's over. It's always going to end at some point, no one ever thinks about that when everything's good.
And so you want to think through those issues and make sure that your client owns as much as they can or should based on the agreement. And even then if they don't own it, in some cases, like if you've been building something for years for another partner, and then that deal goes sour. You may want to, even if you don't own the IP, you may want to have a right to use that IP so that you're not prevented or required to rechange your entire system. So that's another bucket.
A third bucket would be on the regulatory front. As I mentioned, especially right now in the crypto space and blockchain, we're seeing various agencies like fin Senate issued guidance back in 2013 and different agencies that have jurisdiction over different aspects of blockchain and crypto have issued guidance and done some enforcement actions. And there's conversations about them. There's proposed changes to laws now and states are passing laws.
And there's only a limit to what you can do with this, but trying to understand what the regulators were thinking, the direction that they're going in and trying to anticipate that to some extent as you factor in future business plans or putting things into agreements like, if this becomes illegal in the future, what happens and dealing with those contingencies that's part of that seeing around the corner is like, where is this going from a regulatory perspective? What does that mean to the client? And then how should you take action on it based on what they're doing or what they're doing with partners for example.
The broader perspective you have the better and there's elements that you mentioned, cannabis, one of their big problems is payments. And so payments is an area where, at least to some extent like that, overlaps potential cryptocurrency.
So to the extent that there's relevant components of another industry, absolutely. The more you look the better you can see what's actually played out there. And, but you have to understand where that industry is different from the one you're looking at, but glean the things that are relevant and discard the ones that aren't. But for sure you look at other situations in the past and how they've played out, the better you could at least factor that into your decisions.
So I might approach it from a business perspective. I'm not the first to say this, but the business model of law firms is generally stupid. The billable hour. It doesn't help anybody.
I'll give you an example. I have clients I'll have conversations with several times, a couple of hours, and they do something that either makes them a lot of money or they save a lot of money cause they didn't go down a path that would've wasted money, for example. Literally millions of dollars in a couple hour conversation, and I may get a couple thousand dollars for doing that. And that's from a value proposition of having 30 years of legal experience, to be able to give that kind of advice in a very concise way, in a short number of hours that clearly benefits clients. And that's great, but I'm not selling value. I'm selling time. That's not smart.
Then there's other situations where I used to do a lot of litigation. I don't do as much litigation anymore, but litigation is so contentious. Literally you can spend weeks just discussing when you're going to take deposition, you're paying a thousand dollars an hour for an attorney to do scheduling. That doesn't add a lot of value to the client. So that's not good either. That's not what lawyers want.
You want to add value to your client, but there just needs to be a better value proposition, but the general business model always confounded me. And I think a lot of firms talk about different billing models and we have alternative fee models. A lot of them are still primarily based on hours. I could be doing a fixed fee engagement. It's basically starting with an estimate of how many hours, what would it be if we build the hours and then tweaking that. So while you're giving a fixed fee, it's still an hours based thing.
So I don't know. That's just something that's frustrated me and many other lawyers since the beginning of time probably, but it's a great profession. It's very challenging. It's very demanding. All of those things are good and I wouldn't change any of those, but the business model is if someone could come up with a better way to do that would be ideal.
There's a whole legal tech field, so to speak. There's a guy that used to work for me. He started a company that is using AI to draft patent applications. And so it creates a way to take the things that are more the programmatic part of drafting an application and turning that over to a machine. But having the initial input is the lawyer structuring certain aspects of the application that gets fed in, run through the models and then a more enhanced draft comes back and then the lawyer reviews it.
That's one simple example, but there is a lot of technology that's being used and which creates greater efficiency. And I think there's still a question of how do you price that. Some clients, we're like, here's the technology. You should be using this to be as efficient as possible, but the law firm is investing in that technology. How should they get that return? Is it just baked into their hourly rate or is there a better way that again, mutually aligns the value proposition for clients and lawyers to leverage legal tech? And I think that's still emerging as well.
The advantage of that technology is it takes the, I'd say the more ministerial part of lawyering away, like document review, there's tools for legal research, there's tools that will actually if you do an outline of a brief, it will generate a brief similar to how the patent tool works.
And so the benefit of that is clients are paying more for the strategic part of lawyering, which you can't automate. The problem though, is that the way most junior lawyers learn is by doing legal research, document review, and all of that. And so it's putting a greater pressure on junior lawyers because the things they've traditionally done at a lower billing rate to learn and work alongside more senior partners, those opportunities aren't there as much anymore.
And so it's becoming harder in big law for junior associates to have a value proposition. There's some clients that have recognized that and they'll limit what they're going to pay. They don't want to pay to educate a lawyer. And so again, that's a situation where there needs to be a better balance and a rethinking of the system as to how with these advancements in technologies, you bring new lawyers along in a way that's cost-effective.
In the early days of lawyering, there used to be more apprenticeships. Like I mentioned at the beginning of the podcast that I had the good fortune to work at the patent office. Then I worked at a law firm for two years. So when I came out of law school, I had four years of patent experience already. Or three and a half and so I was able to hit the ground running. Most people who go straight from college through three years of law school and then to a law firm have no business experience and they have no real legal experience.
I've had this conversation with some law schools and some professors and others. A lot of the law schools will say, we don't want to be a trade school. We teach you to think like a lawyer and yes, to some extent that's true. But I think clinics are a great way for lawyers to get hands-on experience. So many lawyers come out of law school, they don't even know where the courthouse is and wouldn't know where to go, if they found it. That's a problem.
And again, that's not what you want law school to be, just like a mechanics course. But again putting all that together. I think changes in the law school program would help the situation and may become necessary in light of some of these factors we're talking about.
Keep your eyes open. See where there's opportunities. A lot of people say lawyers are like lemmings, once an area gets hot and it's figured out, everyone wants to do it and then it becomes commoditized work.
And so if you look at the way that you know clients view legal work, there's the bet the company case, then there's the next tier down is complex things that not a lot of lawyers can do that require specific knowledge, expertise, etc. Then the next tier down is probably the vast majority of a lot of legal work that's done by Am Law 100 firms, it requires some skillful lawyering. And then there's the bottom rung, which is just commodity work, which is managing a bunch of paralegals or a lot of automated tools. You want to be at the top of that pyramid or near the top. There's limits to how many bet the company cases you're going to be able to do, but you want to be in that top sector.
And there's a lot of ways to get there. Everything in this world is changing and the legal systems are changing. And if you want to be in that top part, you have to identify where those changes are, identify those trends, what it means from a legal perspective, both in how you lawyer or what it means to a client, what they should be doing differently and get out there and educate clients.
That's one of the things that I do a lot of. There are certain areas, like if the client's doing a antitrust issue, they know they have an antitrust issue. With a lot of the companies I work with, they don't know the issues they have. Part of it is helping them understand what are the legal issues that you're going to face, if you go down this path of doing NFTs or cryptocurrencies or whatever, if you want to do it in a legally compliant way. And so providing that value to the client by helping them know what they don't know, that gets you to the higher end. It's not just about hours or commodity level work.
It's very rewarding. It's very demanding. It's not automatic by any means. It requires an incredible level of dedication and you have to decide whether you want to put in the time and effort to do it.
Some people really just don't have what it takes to be a partner in an Am Law 100 law firm. But a lot of people who do, decide they don't want to do what it takes to get there because of the time and they want to have a better work-life balance. Just go in with your eyes wide open and figure out if that's the path you want and is it realistic that you will be able to accomplish that if that's what you choose.
What I hear maybe the most is that I give quick answers to questions that people think are easy, but they don't understand the hours and hours of reading I do on a weekly basis to be able to answer those questions quickly. I think that's probably the biggest part.
When I was in college, I played a lot of video games. They were very different than they are now, but I was always interested in games. When I was able to get to the point where I was representing so many game companies that I would try as many games as I could, but didn't have time to play a lot of the MMOs and the games that really require a lot of time. So I became more of a sampler of some of those games. But yeah, I continue to play games. My daughter once pointed out that she thought I got paid to play games for a living and it wasn't quite exactly that way.
My favorite thing to do [on the Oculus] is the experiences. There's a lot of recreations of places and the ability to explore parts of the world without leaving are amazing. There's certain games like Beat Saber. Everyone plays that's just fun and it's actually, I wouldn't say it's exercise, but you're moving.
But I'll be honest. My favorite of all times, this is gonna date me is when I was in college, I used to play Donkey Kong. I love strategy games. I love thinking strategically. And whether it's MMOs or other types of games, there's just been dozens that have come and gone that have been fun.
I like getting physical activity. Being out in nature is just … like I'm in Montana right now. I'm surrounded by beautiful snow-capped mountains and it's just a tranquil thing. For me, it level sets the mind and puts me in a good mood.
Lawyers Who Lead is a weekly podcast that celebrates lawyers who are making powerful changes through extraordinary leadership. Each week, Lawline’s Chief Storyteller, Sigalle Barness, interviews a lawyer who is driving meaningful change in the legal industry. Guests represent a diverse and exciting range of experiences but with one common thread, the pursuit of bettering the legal profession.
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