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Movie ‘The Social Network’ Teaches Need for Smart Business Negotiations

Some of the most popular, and interesting, movies in Hollywood history have been based on fact, and last year was no exception. However, along with being entertaining, a Nevada lawyer says, a heavily nominated 2010 film also teaches an important lesson – learning the art of successful business negotiations.

“The Social Network,” a movie about the creation of the social-networking Web site Facebook, shows how people building a company together or entering a partnership can get cheated if they aren’t careful.

“What happened in the movie is, unfortunately, what happens to so many people,” says John E. Cereso, who practices business law with the Nevada Law Group. “People who aren’t knowledgeable about business negotiations and agreements are being taken advantage of, sometimes tricked and shortchanged in their attempt to gain fair treatment and compensation.”

In business negotiations, Cereso says, people should always take steps to protect their ideas.

“Whether as an employee, consultant or partner, try to protect any of your ideas that are original and valuable,” he says. “Always insist on using a ‘non-compete/non-disclosure’ agreement, and never sign anything without an attorney first reviewing it.”

Non-compete and non-disclosure agreements are legal documents that companies use to protect trade and proprietary information. Usually, it’s a clause in a sales contract between a buyer and seller of a business in which the seller agrees not to compete against the new business owner. In other non-competes, an employee agrees not to pursue a similar profession or trade in competition against his employer.

Having one’s own lawyer is another important step in the business-negotiation process. Cereso says employees or partners should not assume that the company lawyer represents them or their interests. He points to Facebook co-founder Eduardo Saverin as an example: Saverin wasn’t careful, and his share of the company was diluted from roughly one-third to less than one-tenth of 1%. [Editor’s note: Saverin later settled for a stake that is widely reported to be 5%.]

Parties involved in business negotiations should also use “relative negotiating” in regard to stock or other units of ownership, the Las Vegas lawyer says. In short, it guarantees that one’s interests will be treated no less favorably than those of the founders and new investors in a new company, or employees and partners in an established company.

“Always ask for a commitment in writing,” he explains. “Failure to use ‘relative negotiating’ cost the real-life co-founder of Facebook $15 billion, maybe even more.”

Cereso also warns that business negotiators should be wary of people or companies with non-aligned interests. Those groups who “claim they want long-term relations, but who do not align interests are either unconcerned with the long-term relationship, don’t intend a long-term relationship or are intent on taking advantage of you.”

For more information about Nevada Law Group, visit or call 702.946.8100.

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