Every January comes with a familiar ritual: new regulations, new enforcement priorities, new anxieties, and resolutions to handle things differently. Some of it matters. Much of it doesn’t—at least not in the way headlines suggest.
In practice, most legal risk in tech companies doesn’t come from surprise rule changes. It comes from predictable pressure points that compound over time. For example, weakness on data privacy leaves companies vulnerable to enforcement action when the new year kicks in. Not having a patent defense strategy leaves implementers vulnerable to licensors’ royalty KPIs.
This post looks at how tech companies can approach legal risk in the new year. Managing legal risk in the new year is less about tracking new rules and more about budgeting, venue awareness, and process discipline.
1. Cost Exposure, Not Liability
The first thing to know is that most legal risk is a function of cost tolerance, not legal merit. Getting things right is generally possible, but it requires committing budget and personnel to solving a problem. Many companies enter the new year thinking about products and sales targets, with legal risk as an afterthought—and budgeting accordingly.
Not budgeting ahead can have major implications later. Without a robust data privacy regime, a data breach can involve high hourly legal spend, fines and organizational bandwidth. A bit of prior planning, however, could make the same breach both less likely and easier to address if it did happen. The dispositive variable is a willingness to pre-commit both funding and key personnel to managing the legal risk.
Litigation is another area many startups avoid thinking about until a case is filed. Savvy operators, by contrast, have identified local counsel and standard operating procedures for handling document preservation and discovery. They also aggressively respond to cease and desist and demand letters, shaping the course of any future litigation. With sufficient resources allocated, litigation can be more effectively managed.
In sum, allocating resources earlier helps to mitigate future costs and preserve bandwidth. This insight matters far more than the fine print of the latest regulations, which can be addressed as part of a company’s existing framework. But when something does go wrong, it helps to know where you’ll be litigating.
2. Where You’ll Fight, Not Whether You’re Right
Even the best-laid plans can go to waste. After all, success makes a company a target, particularly for patent trolls, trademark squatters and fraudsters. Thus, even companies with good legal strategies are likely to face litigation in 2026. What matters most is to strategize about how to approach such litigation—including where and under what rules.
The first thing to consider is venue. While the Eastern District of Texas (EDTX) previously dominated patent-suit filings, the picture is now more complex—EDTX still dominates with foreign defendants, the Northern District of California (NDCA) with Silicon Valley companies, and the District of Delaware and Western District of Texas making up the bulk of the rest (see our post HERE). Non-patent cases are likely to be filed: (i) where one or both of the parties is incorporated or headquartered; (ii) in the jurisdiction specified in a contract; or (iii) in employment or tort cases, where the plaintiff is based.
The key in all of this is to understand where your company has exposure and plan accordingly. Companies should make sure that they have local counsel on retainer in order to respond to any suit. They should also do an inventory of agreements and their governing-law clauses. It also helps to proactively negotiate governing-law clauses in new contracts with an eye toward potential disputes down the road. It is often impossible to avoid a dispute entirely, but being better prepared in advance for one can facilitate a more favorable resolution.
Knowing how one will litigate is equally as important as knowing where one will litigate. Take answer deadlines, for example. One has 21 days to reply to a Federal suit (FRCP 12); 20 days + 10 AM the following Monday in a Texas suit (Tex. R. Civ. P. 99(b)); and either 20 or 30 days in New York, depending on whether they are in or out-of-state (CPLR §§ 320 & 3012). There are numerous other quirks that depend on the jurisdiction. Companies that are more familiar with local laws—both substantive and procedural—are better able to address these challenges when litigation does arise.
3. Third-Party Risk via Vendors and Partners
Many tech companies start the year feeling that they have a clean bill of health. Customers love their products. Relationships with vendors are also good and even strategic. Internal protocols—cybersecurity, anti-corruption, confidentiality—have been given serious thought. Danger, however, often lurks in vendor content. Smart companies audit these risks and proactively prepare to face them.
One obvious risk point is lack of indemnity for vendor tools. Many large providers—particularly those with asymmetric bargaining power—offer their products without indemnity, sometimes free or at favorable rates. These products often contain open-source software or technology that reads on existing patents. Even competent counsel are unable to secure indemnity commitments. When something goes wrong, customers are left to triage and defend suits without indemnity for products they don’t even understand.
What can be done about this? Aside from seeking contractual indemnity, a few steps can help. First, it helps to conduct an inventory of key agreements. This helps to know where the exposure lies. Second, competent organizations insure against risk on the basis of this inventory. This includes not just IP risk, but also cybersecurity risk. While cybersecurity insurance is not expensive, it can be worth it if something goes wrong.
Vendor risk is often foreseeable. If a vendor does not agree to provide indemnity, there is often a reason for this. While it may be couched in the need for exposure certainty, it often does the exact opposite for their customers. Experienced teams take the resulting risk seriously and plan accordingly.
4. Process Discipline
Completely eliminating legal risk is often impossible. Companies, after all, are comprised of flawed human beings who have their own incentives. What matters most is planning ahead so that any contingency is not a complete surprise and can be mitigated. Well-run companies know their legal exposure, plan for it, solve where possible, and implement their plans when necessary. Preparedness can reduce overreaction and overspending.
While it helps to follow legal news in the new year, companies should not overreact. Proactive and fast-moving early-stage businesses often seek to apply the same logic to legal planning: optimizing their early-stage IP portfolios, responding to news headlines, and over-drafting their contracts. These steps often matter much less than good old-fashioned legal risk management and contingency planning. As they say, one should not let the perfect be the enemy of the good.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.