Attorney of the Month Jonathan Johnson of Overstock.com

Jonathan Johnson

Harnessing Legal Power for a Corporate Juggernaut

By Lynette Carrington

People around the world know of Overstock.com as an online marketplace to purchase housewares, jewelry, clothing, bedding, electronics, furniture and much more. The legal demands of the global retail juggernaut run the gamut of everything from areas of employment to international trade. The team of attorneys at Overstock.com is in tune with the company’s every need, and is a close-knit group that always has a finger on the pulse of what legal matters affect the company in an effort to always be on the cutting edge of the issues that could potentially involve their company.

Jonathan Johnson is the former leader of the legal team and current chairman of the board at Overstock. He has been with the company since 2002. Since that time, he has grown considerably in the scope of his job and as with many business deals, it all started over lunch. “I was having lunch with a friend of mine who was the chief operating officer at Overstock at the time, and I asked him what he did as the COO,” Johnson explained. “He said one of the things he did was manage the outside lawyers. I said, ‘You should have in-house general counsel.’ I sent him a resume, had an interview the next week and a job the week after that.”

A Growing Company with Growing Legal Demands
Although he started as general counsel at the company, Johnson’s role has increased in scope over the years. “When I started, I was basically hired to be a lawyer, deal with contracts, stay out of the way and make sure the company didn’t get in trouble,” says Johnson. After having been with Overstock only six or seven weeks, a contract came across Johnson’s desk that included a request for a proposal to win some business from a competitor. He recognized that there were a lot of aspects in the contract besides legal issues. “I went to our founder and CEO and said, ‘Let me captain this project. It has marketing aspects, IT and warehousing.’ He said, ‘Sure, give it a shot. This project needs some adult supervision and you can provide it.’ We beat the competitor and won the contract,” Johnson explains. He has since worn a variety of legal and business hats at Overstock.

He joined Overstock as its general counsel in September 2002. Since then was has had a number of titles and roles within the company: vice president of legal affairs and strategic projects, senior vice president of legal and corporate affairs, president, acting chief executive officer and executive vice chairman. In each of those roles, he was always involved in the legal affairs of the company. “Sometimes it felt busy, but we have always had a great team here,” Johnson explains of his fellow legal eagles at Overstock. “My view is that if you’re trying to solve problems and get things done, you’ll get rewarded in the end.”

The Legal Smorgasbord at Overstock.com
As one might imagine, at a massive international company like Overstock, the legal team gets to work within a wide range of issues. “We’re a publicly traded company so we’re dealing with everything from corporate governance to SEC filings and documents, trademark issues and marketing issues,” says Johnson. “We have more than 4,000 suppliers. We deal with contracts, purchase orders and relationships with each of those and we’re also active online and television marketers.”

“We’ve been heavily involved in litigation, including patent troll litigation,” continues Johnson. “We’ve been sued by many patent trolls who have asserted flimsy patents that covered something on the Internet, like a cookie or a check out card.”

“In patent troll litigation, we have a ‘Spend and Defend’ motto here,” Johnson continues. “We don’t settle when we are in the right. The patent trolls’ business model is to offer up settlements that are less than the cost of defense, telling people it’s cheaper to settle than to fight. We feel like that’s almost like the mob saying, ‘Give us $3,000 a month and we won’t break your store front window.’” The company has had five recent patent troll defense cases and has won four. Johnson feels Overstock will win the fifth case upon appeal.

Another area that has been heavily litigated at Overstock is stock market manipulation. “That‘s been a long standing fight,” Johnson explains. “We have a case that’s pending against Merrill Lynch. We hope it will go to trial early next year. We’re also involved in a lot of government affairs work. A lot of the big issues that affect Overstock and our industry are the Internet and sales tax and whether states can force companies that have no physical presence in that state to be that state’s sales tax collector. The Supreme Court has said no but that hasn’t kept the states from being aggressive and creative in ways to redefine physical presence.”

“Earlier this year, Overstock won a case at the U.S. Supreme Court, Direct Marketing Association v. Brohl. While Overstock was not a direct party, it was intimately involved, believing that the aggressive nature of Colorado law was illegal,” says Johnson. With Johnson still taking the primary responsibility for government affairs matters, Overstock has been a key player in congressional efforts to craft legislation which is fair and workable for both brick-and-mortar and online retailers.

Overstock deals with suppliers from all over the world. “We do a lot of commercial law that crosses borders,” Johnston states. “We’re certainly not involved in treaties and things like that, but we hire firms in China and places all over the globe.”

The Legal Team
The talented legal team that Johnson helped recruit to Overstock is entirely based in Salt Lake City and includes six unique attorneys that all bring different personal strengths to the table. “The legal team is a very close knit group,” Johnson adds. Some of the attorneys have areas of legal specialty. “Overstock has a great intellectual property lawyer that helps with inventions that we have going on within the company, and files patents for us and does all of our trademark work and Overstock has someone that works in compliance and another that does SEC work,” he continues. “Everyone knows how to do basic contracting and litigation and depending on the size of litigation, the team may have multiple people working on it.”

The Internet and Shifting Legal Landscape
As with most things involving the Internet, the legal issues involved with it shift and can do so rapidly. “There are always new issues. One of the issues we dealt with when our business model was strictly being a liquidator was to make sure that the goods we sold were quality goods that were not knock-offs,” Johnson explains. “We’re not so much a liquidator anymore – we’re a general discount retailer. Internet advertising is more modern and we have to make sure that we comply with advertising laws. Tax issues are also a big deal. Over the years different legal issues have taken different levels of effort.”

A New Type of Leadership?
Johnson has never been one to let grass grow under his feet. His next challenge will be a massive undertaking as he is seriously contemplating running for the office of governor for the great state of Utah. “I’m not so interested in being the governor as I am in being in the position to do the things the governor can do,” Johnson explains. “I think that the education system in Utah needs transforming. I think we need to be more aggressive in protecting our environment whether it’s better air quality along the Wasatch Front or healthier management of our public lands. We also need to be careful with our budget to ensure we’re not as dependent on the federal government in the future.”

A few years ago, Johnson read the book “Leadocracy,” by Geoff Smart, sparking this interest in a political career. The book’s premise is that the business of government and how the future of our government may very well depend on great business minds and leaders within the private sector transitioning to become governmental leaders. “It talks about how citizens essentially hire our government leaders and what types of characteristics we should look for in those leaders,” says Johnson. “As I read it, a lot of the concepts and attributes it talks about I recognize as things that I have done in helping to build Overstock from the 50 or so employees it had when I joined to the nearly 1,800 people we have now and from $50 million in sales to over $1.5 billion.”

As he read the book, Johnson recognized everything he enjoyed doing and felt his past actions displayed his strong business mind and natural ability to lead. “The last chapter of the book said, ‘If you’ve read this and think it applies to you, please sign this commitment that by your 70th birthday, you will have spent two years in public service,” Johnson explains. He signed that certificate and discussed with his wife what that public service might look like. After analysis of the options available, they felt Johnson’s longhoned skills will fit an executive role. In the business world, he has been no stranger to breaking new ground, solving problems in unique ways and embracing what new technologies can bring to the table. He hopes to be able to bring that expertise to the office of governor in Utah.

The response from the Overstock legal team has been one of support. “I hope they are genuinely supportive. I’m always worried that when you’re the boss, everyone tells you your ideas are good,” Johnson says. “I’ve tried to create a culture where people can tell me when I’m wrong. Most importantly our founder and CEO of Overstock.com, Patrick Byrne has been supportive.” Johnson continues to be involved in Overstock as its chairman, but in a less hands-on way, so he can work to realize this new objective.

A Future Development at Overstock.com
As Overstock.com has grown it has adapted to the legal and Internet landscape and kept in an upward trajectory of success, sales and customer satisfaction. As with all companies, challenges will always exist.

“We’re branching out into a part of business that’s very new – blockchain technology,” Johnson explains. “We began accepting Bitcoin as a form of payment over a year ago and we’re now working on being able to provide an alternative to the stock exchanges based on blockchain technology. No paper certificates will be required. Stocks and bonds will settle much more quickly. It’s different from our core business, so of course there will be a host of new legal issues for the team to consider. We’ll be on the cutting edge of what will be a growing and transformative industry change.”

The entire legal team at Overstock is completely committed to the company. “Some places of work are just that—work. At Overstock.com, it feels more like a family. We’ve had very little turnover of the legal team in the last decade,” Johnson finishes.

For more information, visit www.overstock.com.