Legal issues around robotics and automation companies all too often come up after something has gone wrong with a project – either a figurative or literal blowup that requires many lawyers, money, and time. Managing a company’s legal risk on projects before they are deployed can often mean the difference between a successful project or years of litigation, said two lawyers with extensive experience in the automation space.
“Don’t take it for granted that things are going to work out because you’ve got a good working relationship with the companies that you consider customers,” said Mark Voigtmann, a partner at Faegre Baker Daniels LLP. “Get out ahead of the problems that could happen before they happen. It should not shut down your sense of entrepreneurship or risk taking, but it converts blind risk taking to knowledgeable risk taking.”
“The problem is when [companies] walk into risk that they aren’t aware of — if they don’t understand what the risk is — then they can’t appropriately price the value of the goods and services that they’re providing in the marketplace,” said Brian Clifford, another partner at Faegre Baker Daniels. “Managing legal risk is not fundamentally different than managing any other risk that companies undertake – engineers and implementation teams are constantly doing that by looking at ways to best deliver solutions to clients. Mark and I fundamentally are doing the same thing, just in a legal realm, and you can’t ignore one without having an impact on the other.”
Voigtmann and Clifford will be sharing details of some “projects gone wrong” at a session at RoboBusiness, to be held Sept. 25-27, 2018, in Santa Clara, Calif. (Robotics Business Review produces RoboBusiness).
The session, “Learning from Meltdowns: How to Best Manage Your Company’s Legal Risk,” will take place on Thursday, Sept. 27, at 11 a.m., as part of the Robo Industry Summit.
When pre-existing equipment gets in the way
One of the biggest mistakes that robotics companies can make when implementing a new project concerns pre-existing equipment. Voigtmann said when automation is deployed, it is not always in a greenfield environment where things are being built from the ground up. Instead, a business could add robots to an existing facility where some systems and other machines are not being replaced.
“I think one of the themes running through our presentation at RoboBusiness will be how to deal with the problems of pre-existing equipment, how to better define the risk that you’re taking on — not just as to your own design and technology, but also to what came before.”
A big issue around legal risk is who takes responsibility for the equipment during such a project, Clifford said.
“So when something goes wrong, who bears the risk of that machine?” he asked. “For example, should the automation vendor speak up and say, ‘Hey, there’s something wrong with this underlying equipment. I know I’m not the equipment vendor, I’m not the person who’s in charge of doing this, but as I’m doing my work to automate it in some way, I’ve discovered a problem’? Or is it unrealistic to expect that your automation vendor should be doing anything other than what you hired them to do?”
Voigtmann said a trend running through the robotics industry is similar to the “You break it, you buy it” policies at retailers.
“There’s a little bit of that going on in the robotics trade – if you touch a project, and that project causes something that connects with it to break or cause injury, you’re going to be blamed, even if you had nothing to do with the equipment that had an issue,” Voigtmann said. “The argument sometimes is that automation and robotics vendors, whenever they touch something, they need to own 100% of the safety that’s even connected to that equipment.”
“That’s not right, but it’s something that in the contracting process and the risk management process really needs to be addressed. And we’ll tell how,” he added.
Legal risk usually not a priority
Both Clifford and Voigtmann said startups often don’t understand the need for legal assistance at the early stages of their growth. Companies need someone who can help them navigate through issues that include regulations, contract negotiations, and patent ownership disputes.
Clifford said he advises startups to have at least four people apart from the founders and engineers involved with the company:
- An accountant who understands the company’s finances
- An insurance agent who can help identify areas of insurable risks that the founders can’t anticipate
- A good attorney who truly understands the company’s industry
- A significant other or family member that can be supportive through the long hours and stress of building a new business
“When a startup company is trying to get ahead in cash flow, it is not going to prioritize the management of legal risk,” said Voigtmann. “[This] is basically putting its entire operation — and even its entire existence — on the line and at risk for every project it does. In our view, the management of legal risk has to be a very large part of the attention given at the beginning.”
The two attorneys said they plan to have several case studies involving companies that weren’t prepared for the unexpected, including one called “The Case of Houston, We Have Liftoff.”
“I will let that teaser stand by itself, but let’s just say a mistake was made by somebody bumping into a switch that resulted in an entire facility being shut down,” Voigtmann said.