Sun Microsystems GC Mike Dillon: Virtually Everywhere
By Scott Martin03-10-2006
Silicon Valley computing giant Sun Microsystems went into Pac-Man mode last year, going on a multibillion-dollar spending spree and gobbling up four companies in as many months.
That was a "crazy summer," said Sun Microsystems General Counsel Mike Dillon, who is at the helm of a roughly 170-lawyer legal department spanning 25 countries.
Dillon's team defies the classic image of in-house lawyers lined up in offices alongside the chain of command. The legal department is instead tethered together in a highly unconventional arrangement: Many work off-site connected into Sun by computer.
Law.com recently spoke with Dillon -- who was off-site himself -- to learn more about Sun's legal department and its role in the spate of serial acquisitions.
Law.com: Where are you located?
Dillon: I'm located in the Bay Area but one of the things that might be interesting to you is I don't have an office. I kind of roam around.
Law.com: Really?
Dillon: Yeah, it's funny, I was in a conference back in Washington a few weeks ago and I was talking to the GCs from a bunch of other companies, and I said I am guessing I am the only GC of a $13 billion to $14 billion company that does not have a dedicated office. The way it works here is we've got some really cool technology. We've got something called the Sun Ray, which is essentially a thin client, so it's a screen, a keyboard and a mouse, and inside the screen is a card reader.
Law.com: How long have you been kind of a roving attorney for them?
Dillon: Since about a year ago. And actually right now about one-third of my department either works in drop-in offices or they work in the main campuses or they work at home.
Law.com: So how do you feel it's changed your department?
Dillon: It's interesting. When I came back to Sun it was kind of strange for me because when I left in '99, it was the classic model where you had all your lawyers and legal professionals sitting in a hallway alongside you. Then when I came back everyone was largely spread out and it took a while for me as a manager to get used to it and to get comfortable with it. And then after about a year of it, I really began to embrace it and see how liberating it is. To be honest, I think it makes us much more effective with our clients because instead of the traditional model where your client comes to your office and you talk to him and counsel him, we're actually out there going from client to client, and it creates a closer relationship.
Law.com: Is this a pretty unusual model?
Dillon: From my colleagues who have left Sun and gone to other companies, I'm not aware of anybody else that does this.
Law.com: What is the biggest practice area overall that you cover?
Dillon: Well, Sun is a company that is owned by innovation and R&D and so as a result, most of the attorneys that practice in the department do some sort of licensing whether it's inbound licensing involved in the creation of IP and of products or licensing on the outbound side on the sales delivery channels.
Law.com: We've been looking at the $4.2 billion StorageTek acquisition that Sun completed. What was the most difficult legal aspect to that deal?
Dillon: It's interesting; most people or most lawyers that are involved in acquisitions are focused on the deal, the transaction, the due diligence aspect. But that's the smallest part of a deal like this. The big challenge and the big lifting all comes afterward in the integration process, and we're in the middle of that right now. We, prior to the StorageTek acquisition, had about 30,000 employees. With that acquisition, we are adding about another 7,000 and then with the SeeBeyond acquisition, about another 1,000 employees in Southern California. So you are almost adding a quarter of your employee base. On a worldwide basis you have international subsidiaries that you have to merge.
Law.com: Can you speak a little bit about indemnity clauses or other things that you might have had to consider?
Dillon: I think with any deal this size your issues are the types of issues that come up in the due diligence process. So are there lease obligations that they can't get out? Is there litigation that you have to assume? Are there executive severance packages or things of that nature on the people side that you have to negotiate?
Law.com: Do you have a list of things that you might have to consider? Things that are red flags?
Dillon: Yeah, on the legal side, again, I think the big issues that I get concerned about are the ones in the compliance area. So, for example, do they have the necessary export processes in place to ensure that they have the licenses that are required? Do they have intellectual property that is segregated from foreign nationals that are working for them so that it's not deemed as an export under export regulation? Are there any violations there? Is there anything that we need to be concerned about? And then going into the area of FCC compliances, the host of things that you normally look for, such as have they filed on a regular basis? So those are, in the compliance areas, probably foremost in my mind.
Law.com: Does SOX compliance fit into that?
Dillon: Yes, by all means.
Law.com: What are your biggest international efforts?
Dillon: Well, it is interesting that probably a little more than half of our revenue now is outside of the United States, and Europe is obviously a big geography for us. Japan and India are increasing as a market. China certainly is increasing. I would say traditionally Europe has been probably the next biggest market from the United States.
Law.com: How many firms were you working with, say five years ago, and how many firms are you working with today?
Dillon: Probably five years ago we were using between 300 to 400 firms. Over 55 percent to 65 percent of our budget is on outside counsel. Currently in the United States we are probably down to about 100 firms, maybe 150.
Law.com: I noticed that Sun does a little bit of blogging from the executive ranks. Does Sun have an employee blogging policy in place?
Dillon: When Jonathan Schwartz, our president, first said, 'I'm gonna start a blog,' there were many people on his staff who weren't sure what a blog was. And then there was a lot of discussion about what does that mean, what are the concerns, how do we create a structure that assures that things like confidentiality and financial results and other things are not disclosed and so it is an internal process. What we came up with is you have to register to blog as an employee at Sun. Then once you register, before you can start blogging, there is a certification and a policy on blogging that an employee has to read and agree to.
Law.com: Is anybody in the legal department blogging now?
Dillon: The question is whether there would be value and interest in communicating externally by having a GC blog to the external world. It is one of the things I think about periodically. To be honest, though, doing a good blog requires time.
Law.com: For cost-cutting, is Sun looking at outsourcing legal work overseas?
Dillon: We've looked at that. I was actually in Bangalore earlier in the year meeting with outside counsel, assessing what the capabilities were in that area. Went to New Delhi and did the same thing. There are opportunities. We are looking at some, but we're also looking for outside counsel in firms to be thinking about that. For example, just the other day one of my attorneys who supports litigation work was talking about one of the firms that he had interviewed in the Midwest, which is a lower-cost litigation center, who actually had a relationship with a firm in India so that a lot of the discovery work they were doing in that fashion was at a lower cost for their clients. But again, it's about the quality.
Law.com: Are you out there looking for patent violations or do you have people that are looking at that all the time?
Dillon: We have a very broad patent portfolio. I think we've got about 4,000 issued patents worldwide, and we have a team of folks that are definitely focused on areas where there are opportunities to engage with another party and talk about a patent license, but most of our focus on the patent side is on protection of our intellectual properties -- so protection of patents and trademarks, copywrites, protection of trade secrets.
Law.com: How do you spend most of your time?
Dillon: A lot of what I'm focused on is organizational issues, people issues. The other part of my role is being what I would call the classic trusted adviser to the executive team. That's the person who, behind the doors, can give them feedback or guidance. There are a million different legal issues that arrive on a day-to-day basis. I joke with my team that I have not had a boring day or a day that has been the same as any other. Every day I come in, there is something out of the blue, but that's what makes it so invigorating to work here.