January 2010

Whether you resell your technology using a software reseller or SAAS reseller agreement, take a read. Until recently, if you were a reseller or an informational website you could not use the trademarks of the manufacturers you represent in the ad text of your Google ads. This kind of made sense, as it is not your trademarks. However, Google did a little more thinking about the issue, and revised their Trademark Policy  (probably as a result of the fair use doctrine).

There are still a few rules though (summary below), before anyone can take advantage of this new policy:

1. you have to be either a:

• reseller,
• informational site,
• maker or reseller of components parts, or
• seller of compatible components or parts related to the trademark.

2. the product or service from resellers must be on the:

• ad’s landing page, and
• clearly available for purchase

So if you are an ISV don’t be surprised if your resellers show up in Google ads with your trademarks; and if you are a reseller or informational site you may be able to use the trademarks of the manufacturers you represent in your Google ads. Remember to talk to your trademark lawyer with any questions though.…

Can Your Customer Transfer Their Software as Part of a Reorganization?

Seems like a simple issue, but can your customer transfer your software or licenses to another entity? Well, the right way to address this is up front in your agreement, but this is too often not the case.   Also, when it is addressed, sometimes it does not clearly address every situation (internal transfers, external transfers, reorganizations, mergers, stock sales, assets sales, etc.). This is definitely something to talk to your software attorney about first, but below are some of the things that may come in to play.

What Type of Transfer is it? Who were the users before and who are after? What type of reorganization is it (stock sale, asset sale, merger, internal reorganization, etc.)?

What Does the Contract Say? Does it allow or prohibit transfers and assignments, and in what situations.

What Does State Law Say? Talk to your attorney, but state law usually matters too (i.e. it may overrule or interpret the contractual clause).

What Does Federal Law Say? This matters too, as in the case below, the court ruled that federal law governed (patent and copyright law), and not state law.

I wish the answer was simple, but as an example a recent case in late 2009 essentially ruled that the contract and federal law ruled that day. The customer had transferred the license (which was a license to a specific computer) to another internal entity, even though the contract said that the transfer was …

Did You Know the US Supreme Court Changed Software and SaaS Distributor – Reseller Law in 2007?

I bet you missed it, but I always look for the software  law perspective of these cases (how does this apply to software/SAAS reseller agreement, software/SAAS distribution agreements and software/SAAS oem agreements). The law used to be that when someone resells your product you could not tell them that they could not resell the product below a certain price (i.e. a floor). You could  suggest that they hold to a certain price but you  could not mandate the floor price. Violating this rule used to be a big no, no. By the way, this explains why you often see ‘Suggested Retail Price’ on merchandise tags. In legal jargon, this is called ‘Resale Price Maintenance.’ To cut a long story short (and it is a long story), 96 years of law was changed by the US Supreme Court in the 2007 decision in the Leegin case.

Essentially, manufacturers can now influence resale prices in certain situations. So what are those situations? Well the legal standard changed to what is called a ‘Rule of Reason’ from a ‘Per Se Rule.’ Without boring you to tears, what this means is it depends on the facts and circumstances, effect on competition, competition within the channel, etc, etc.

Bringing this down to reality and specifically to the software world, I have often heard about software resellers free loading and not providing the value-added …

Ok, ok this is a legal blog, so I am actually talking about naked trademark licensing issues here — a few nuggets for every software or SAAS executive to think about for their software or SAAS partner agreement, SAAS OEM agreement, etc.

“Naked Licensing” is in essence a legal defense to a trademark infringement claim, and you absolutely should be aware of it as the consequences of not knowing can be really grave (aka a big deal).

Ok did you get that part about ‘abandonment of the trademark.‘

Now that I got your attention, here are 3 things to remember to help avoid this.

1) Don’t Let Anyone Use Your Trademarks Without a License Agreement. Hopefully I said that clearly enough, but that is the best way to avoid this bad outcome. The trademark license agreement should (at a minimum) expressly state that any use of your trademarks are subject to your trademark guidelines (i.e. supervise their use of your mark), and make sure you take steps to ensure that your trademarks are used in an appropriate manner with the associated goods or services. You can embed this language in any software or SAAS partner agreement.

2) Remember What is At Risk Here! Think about it, you develop your trademark (maybe your company name or logo) and people associate your business with that name or logo. However, if you don’t take certain protective measures when allowing third-parties to use your trademarks you could abandon the mark ( = …

I am a big believer that you have to build trust with your customers before they will work with you. So why does this matter to a lawyer? Well, for a SAAS company to build trust with its SAAS agreement, it needs to look bigger and more sophisticated that it actually is to its customers. One of the ways to do this, is to make sure that all of the non-marketing touches with your customers ooze sophistication (your pricing methodology, contracts (don’t forget those), community product management). Take a look at the SAAS University as these guys are focused on helping SAAS companies ooze sophistication. They have regular conferences and a newsletter, with lots of helpful topics and contacts. While I may be drinking too much of their cool aid, as I am going to present at their conference at the end of the month, I think you will find some useful resources there. I will be sure to write a Version II of this story, and tell you what helpful things I learned when I went back to back to school.…

People often ask me can I use this or that work of a copyright owner. Basically, as a copyright attorney, there is a legal concept called ‘fair use’ which allows non-copyright owners to use copyrighted works in certain situations.

What are the situations? Well, this is one of those it depends, as there is a 4 part test.

1) Purpose and character of the use.

• commercial nature (- for fair use) or nonprofit/educational (+ for fair use)
• commentary, criticism or news, as this is a + factor for fair use (the First Amendment kicks in here).
• transformative (adds something new) (+ for fair use) vs derivative (- for fair use)

2) Nature of the copyrighted work (factual (+ for fair use) or creative (- for fair use))

3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole (less used (+ fair use) and more used (- fair use))

4) The effect of the use upon the potential market for, or value of, the copyrighted work (less of market effect (+ fair use) and more market effect (- fair use))

These factors are weighed in each situation to determine if it is a fair use, or not. If you are right and it is fair use, then you can use the copyrighted work without the permission of the copyright holder, but if you are wrong, then you may have some significant legal problems (if the copyright holder decides to pursue the matter).…

The Altimeter Group recently published a report called the Customer Bill of Rights: Software-as-a-Service which caught my attention, as I am a SAAS attorney who works on SAAS agreements (some people call them SAAS license agreements). The report is titled  ’39 Best Practices to Improve Client – Vendor Relationships.’ I am not sure that this is the end result of reading the report, but there are interesting points addressed in the report. Also, it appears to me that this report is somewhat (maybe very) slanted in favor of the customer’s perspective, but it is still a must read for SAAS vendors.

The report outlines many issues that — they believe — prospective customers should bring up as part of their negotiation process with SAAS vendors. It is primarily a list (long list too) of things that SAAS vendors should be addressing in their day-to-day business practices and SAAS agreements, to make the prospect feel more comfortable with and trust the vendor. While I agree that it is important to build trust with a prospect before closing a transaction, I look at the usefulness of the report another way.

Instead, I suggest the purpose of reading the report (for SAAS vendors at least) is as follows:

1. SAAS vendors should anticipate what their customers and negotiators (whether it is their purchasing department or attorneys) will ask for and expect as part of the buying process.
2. SAAS vendors should study their customer’s point of view/perspective, so they can make sure they are addressing

One of the things I am really passionate about (as a software copyright attorney)  is simplifying complex issues in the law (maybe that is how I process things) and I have found that software law is too complex for most people to really effectively deal with. As the title suggests, I am going to try to explain and discuss important areas of software law and keep it simple.  Ok, so here we go.

So what is software law? This seems like a good place to start. Well the wiki definition is really not what I am thinking about link. Software law on this blog will be more about the important legal issues affecting software companies as they grow and are then eventually sold through a company exit strategy (i.e. mainly expansion stage software companies). I plan to discuss licensing/drafting issues, IP protection, software development and sales/marketing issues, HR issues, other regulatory issues and some fun topics too. What is really interesting about software law though, is that it is relatively new. The law associated with goods and services has been around for hundreds of years, but in relation to software, the law is relatively new and quite frankly it is still being created (most of the issues have only really been developed/addressed in the last 15-20 years). Ok that is the extent of the history lesson; so let’s discuss something more interesting.

What I find fascinating about the software law legal model is that the cost of replacement …

As a software copyright attorney, I try to keep up with the most recent cases affecting software companies. As a recent case decided on September 21, 2009 illustrates, if your goal is to keep your pricing information or price lists confidential you should protect that information through the consistent use of confidentiality agreements/non-disclosure agreements.

In this instance, employees solicited business from their former employer’s customers. It just so happens that the former employees knew the confidential pricing information of their former employer, so they allegedly used it in soliciting new business in competition with their former employer. Of course this resulted in litigation, and in the final round (on appeal) the court ruled that, essentially, if a company discloses pricing information without a confidentiality agreement they cannot later claim that the pricing information is a trade secret and confidential information.

Now I am sure that any good lawyer can distinguish the case or argue another angle, but there are some good takeaways:

• If you want to keep your pricing confidential, then consistently use confidentiality agreements.

• Simply marking the information “Confidential” will not cut it (you need a signed agreement).

“New” Non-Latin Based Domain Name Extensions: What Is This All About?

You may have heard that ICANN (the group that manages naming conventions on the Internet) recently announced that domain names will now be allowed in non-Latin languages. This may not seem like a big issue from the US perspective, as we are all used to domain names in our native language, but this will have a significant positive impact to people in Asia, Russia and the Middle East. People in these regions and countries will soon be able to locate websites in their local language (languages under consideration include: Arabic, Persian, Chinese (simplified and traditional), Russian, Hindi, Greek, Korean, Yiddish, Japanese, Tamil, Hebrew and Amharic). More information on the announcement is at: ICANN

As a software copyright attorney, I realize a lot of the new way of marketing is based on becoming a publisher, but some people may not realize that there are important copyright issues in play here, which should be thought through, as they may be counter intuitive.

General Rule – The Creator Owns the Content. The general rule under copyright law is the one who creates the content, owns the content. This is a pretty basic copyright concept, but under closer scrutiny, an interesting issue comes to light when outsourcing content creation.

Exception – Work Made For Hire.

• Content Created by Employees. There is an exception to this general rule, which provides that employees who create content within their scope of employment automatically provide ownership to that content to their employers (i.e. work made for hire), without having to address it in a contract (although IP agreements employees sign when starting work usually clarify this copyright ownership issue).

• Outsourced Content Creation. Here is where it gets more interesting, or fun if you are an attorney. Outsourced content creators (i.e. independent contractors) own the content they create/provide, even though they are fully compensated for the work. This means that the outsourced content creator could (a) sell the content to someone else, or (b) re-use it in another way (remember, they ‘own’ it, and the company that paid for it receives an implied non-exclusive license). This same outcome occurs when hiring an outsourced software developer, architect or professional photographer, so it is

I have found it interesting that there is too often a different perspective between when business people and lawyers think a Software Licensing or SAAS deal is done. I have met some business people that believe the deal is done once they orally discuss (not necessarily agree to) certain important terms. On the other hand, lawyers generally believe that deals are not done until a written contract is signed by the parties (there can be oral contracts in certain situations too, but I leave that to another day).

So why should this matter to a software or SAAS company?

Well, as a case decided on September 25, 2009 in New York demonstrates, if you are not careful about your email communications, someone may take an aggressive stance that an email exchange was a binding agreement to an exclusive license in your IP. In this case, there were many emails between the parties discussing/negotiating an exclusive license to a copyright in a hot movie (it had won a bunch of recent awards). Then I think, out of the blue, the plaintiff wrote back and essentially stated that the deal is done. The defendant responded, in essence, with we will get back to you. The court correctly decided that there was no contract as the parties were still negotiating the deal, and dismissed the case. A good decision by the judge!

The lesson to be learned here, is that if someone takes an aggressive stance in an ’email exchange’ that …

Who Else is Streamlining Their Agreements (software attorney’s take)?

It appears that other legal minds out there (other than a software attorney) are thinking of ways to streamline agreements, as the in-house team at Scottish & Newcastle (a beverage company based in Scotland (I had to look that up)) has documented their view on the subject. They have come up with an approach called “Pathclearer” which is actually a really well thought through approach.   In this 8 page article they explain the methodology and even provide a link to a template. Essentially this in-house group of Scottish lawyers have really tried to ferret out inefficiencies in their legal processes to help the business succeed, and I applaud them for it. I really think that software companies should look at ways to streamline their revenue generating agreements (end user, services, support, etc.) with approaches like this.…

How does the App Store Handle App Licensing (you know, Software EULAs)?

In essence we are going to look at something I call ‘platform licensing,’ for lack of a better term in terms of the App store licensing (you know, software EULA and software licensing agreement issues). iPhone users for example, may notice (or in reality not notice) that they can purchase (nearly all the time) a software app in the app store without agreeing to any sort of end user license agreement as part of that purchase (they have to provide the iTunes password though). Quite frankly, this is one the great features of the app store, as it really makes the app purchase process easier and much, much smoother.

This model looks like a sublicensing model (where Apple sublicenses the app to the user), but in the iTunes agreement, Apple takes the stance (obviously for protection from claims, including patent infringement claims) that they really are an ‘agent’  (you know, someone acting for someone else) and the app license agreement is directly between the app creator and the user. I have not seen this ‘agent’ model used before in this context, but I am not saying it cannot be done or is not right.  In essence, Apple is saying that the user purchases the software from Apple (i.e. pays Apple for the software), but is actually licensing that software directly from the app creator, as Apple is only ‘an agent.’ Of course when an iTunes user agrees to …