2010

1) Getting To Yes – by William Ury and Roger Fisher. Negotiating Agreement Without Giving In. Amazon Link

2) Difficult Conversations -by Douglas Stone, Bruce Patton, Sheila Heen, and Roger Fisher. How to Discuss What Matters Most. Amazon Link

What is the Purpose of a End User Agreement (EULA or SaaS Agreement)?

While this may seem basic, from the perspective of a software attorney, it is something that I often discuss with clients. If you think about it, end user agreements (whether an EULA or SAAS Agreement) are arguably more important than contracts in other industries. In most industries, the buyer purchases a tangible product they then own, or generally knows what type of services they will receive. However, in the IT world it is not that simple. As the buyer in the IT world does not ‘own‘ the product and often is unsure of exactly the type of service they will receive, I suggest that the contract is more important in this context and can be very helpful to the selling process.

Let me explain further.

1. The contract should explain/support the business model of the seller, and be 100% consistent with that model.

2.The contract should set the right expectations, so that the customer knows what they will and will not receive, and what the seller will and will not provide.

3. The buyer should be able to read and hopefully understand most of the contract without going to their attorney.

4. The contract should of course address what happens if things go wrong, but I suggest that is not the sole purpose of a contract (see 1-3 above for main purpose).

I realize this is a very simple take, but that …

Here are the 4 things to remember, from the perspective of a software copyright attorney.

1) Copyright Attaches Easily. It is relatively easy to get basic copyright protection (you know that (c) Copyright Notice on the bottom of text, articles, websites, etc.) This is something to keep in mind, as claiming that a work is protected by copyright is a good first step. While providing the notice is not technically required, it puts people on notice that someone is claiming ownership of the work. So this is something to use often with works you want to protect.

2) There are Essentially 4 Rights. If you own a copyright, you have the exclusive right to:

• Reproduce,
• Distribute,
• Create Derivative Works (creating another work based on the work), and
• Display/Perform Publicly the work.

So this means that the copyright owner has the right to stop someone from reproducing, distributing, creating derivative works and displaying/performing the work publicly, and it will be a violation of federal copyright law if someone were to do so without permission.

3) Lots of Exceptions. This is where it gets more complicated. Copyrights

Also there is a concept called Fair Use, which essentially says that someone can use your copyrighted work without permission in certain situations.

• do not apply or protect ideas, concepts, methods ideas or discoveries, etc.,
• do not apply to common properties in nature (calendars, charts, etc), and
• do expire.

4) Many Benefits to Registration. If there is one thing to remember about copyright …

The New Blogging and Endorsement Guidelines by our Friends at the FTC

I have been tracking this issue for a while, but I wanted to wait until I had a concise and insightful perspective before I blogged about it. So here goes.

In essence, the Federal Trade Commission (FTC) published these guidelines to address what some creative advertisers were doing with blogging and in the social media arena (Facebook, Twitter, etc)  (i.e. paying bloggers to endorse their product without the bloggers actually believing in the product or maybe without even using it). The FTC is really  focused on the product advertisers, and not bloggers or users,  unless the blogger is a sponsored endorser (i.e. receiving something ($, product, etc.) in return for promoting the product). [By the way, the FTC has even stated that they drafted these guidelines not with the intention to sue bloggers, — I thought that was a nice touch]

A definition will help.

An  endorser is someone that publishes an:

“…advertising message those consumers are likely to believe reflects the opinion, belief, finding or experience…” of the publisher,  but is not the product advertiser.

It is obviously relevant if the person is:

(1) providing an  independent review [i.e. off the hook], or

(2) somehow compensated by the advertiser (directly or indirectly).

Examples of sponsored endorsers: paid bloggers, or bloggers that receives many free products.
If there is a sponsored endorser, then the  advertiser and the sponsored endorser could have liability …

SaaS Agreement Templates are Too Important to Leave to the Lawyers!

Seth Godin did a great job with this perspective on marketing (‘why marketing is too important to leave to the marketing department’) but it triggered something in me (at least from the perspective of a software attorney): SaaS agreement templates are too important to be left to the lawyers. Let me explain.

I have found that most IT companies or companies have end user agreements provided from their outside lawyers. These agreements look like a corporate type agreement (pretty formal) and are long/way too complex. On the other hand, IBM and Oracle had non-lawyer consultants help their legal departments to simplify and streamline their end user agreements, as they realized early on that their agreements were an impediment to closing a sale (not a good thing). I doubt most IT companies can afford to hire a bunch of consultants to help them with their agreements the way IBM and Oracle did, but what they can do is  not accept such complexity and length in their SaaS agreement templates. They should challenge their lawyers to simplify and shorten these agreements. Remember that lawyers are paid by the hour, so the longer the agreement the better. Do you think a longer agreement is easier to explain to a jury?  I don’t think so.

More to come on this topic, but I want to plant the seed  that you don’t want to put a complex SaaS agreement template in front of your …

Contrary to common perception, for privately held IT companies, one law firm for the company may not be the right fit; at least from the view of a software licensing attorney. The founders have a relationship with one law firm that usually handles all the legal issues. I have found that too often it is more economical to find specialized lawyers at small firms (they usually provide better service for smaller companies too). These firms will inherently have more reasonable hourly rates/fee structures. On the other hand, it makes a lot of sense to have a corporate lawyer from a larger firm if you are venture backed (as corporate law issues can be quite complex in those situations), but that may not be the case in other areas: for employment, trademark, copyright, patent, litigation or licensing issues. The hourly rates of some of the larger firms have increased dramatically over the last few years (in fact some attorneys bill at $1,000 an hour), but that does not necessarily hold true for smaller firms.   When thinking about rates, I have also talked to many CEOs that would not make the call to a $550 an hour attorney for advice on a potential dispute, but would probably make the call if the attorney were $200 something an hour (I suggest that not making a call to a good, reasonably priced,   lawyer for advice could be a missed opportunity to avoid a dispute).

For example in litigation matters, often the total legal fees …

I get this question often as copyright lawyer, so I thought I would briefly explain what intellectual property is (at a high level). Intellectual Property or IP, should really be viewed when compared to other types of legal property, namely real property (i.e. real estate) and tangible property (i.e. things you can see, touch and feel (other than real estate)). IP is really an umbrella term, as it is broken down into copyright, trademark, patent and trade secret laws. When you hear people referring to IP, just think about these 4 areas of the law, as that is what they are really describing.

So why should an IT company care about these laws?   Well, these laws help to define/protect your rights in your important property.

• Copyright law protects and provides rights in various things, but to start with they must be ‘fixed in a tangible medium’ (i.e. can be perceived, reproduced, or communicated (written, images, etc.)). This means that copyright law protects source code, and other items that a software company writes or publishes. For example, if someone were to use your company’s source code without permission, copyright law will be one of the legal vehicles employed to identify the property, and right the wrong.

• Trademark law protects and provides rights in words, designs, logos, phrases and slogans that identify products, and distinguishes them from the products of others. This area of the law protects company/product names, logos and associated marketing phrases, and is much more important today, as these

As a software copyright attorney, I was wondering if you read all the electronic contracts you enter into (yea right). But just in case you had, you may have noticed one sentence in certain contracts that states that one party (always the party that wrote the electronic contract) can change the software contract “…at any time, in its discretion….”

• You probably have heard about this particular case, as Blockbuster was supposedly transferring movie rental information to Facebook accounts, without the express advance permission of the Blockbuster account holder (in essence people had automatically opted into this program, called “Beacon”). This program was widely reported and Blockbuster was subsequently sued.
• Blockbuster claimed that the case could not be brought in court as it had to be resolved through arbitration as provided in the Blockbuster ‘Terms and Conditions.’ However, the court ruled that as Blockbuster included language in the contract stating that any contractual term could be changed–at any time, in its discretion–the arbitration clause was therefore not enforceable.
• If you really think about it, a contract is supposed to be a fixed agreement between two parties, and neither party can change it without the permission/consent of the other party.

Just a suggestion for any Software or SAAS based company, which of course is relying on its end user/customer contracts to be enforceable.

By the way, keep in mind that policies can generally be changed without permission, but this case was about contracts not policies.

Disclaimer:

This is for informational and …

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