Reading Agreements Critically with a Contract Playbook

March 1st, 2010

Followers of this blog may be aware that I avoid reading contracts front-to-back as much as possible.  I find that breaking a contract into chunks lets me read more quickly, more effectively and more critically.

To do that, a client and I recently adopted a strategy that I have used informally for a long time, which is to develop a playbook of preferred terms that we incorporate in our form documents so that when I sit down to read a contract I know exactly what I am looking for.

I start my review by comparing the contract against my playbook and making notes on any differences.  After I finish that I usually have a good sense of how the contract is structured, and I can then read through to put the sections together.

On top of the contract-review benefits, having a formal playbook makes it easier to coordinate contract strategy with clients, and also to maintain consistency over time.  When we have a clear sense of what “normal” is, we can develop a set of arguments to support our preferred terms, and also keep track of which deals required us to deviate from our standards.

A contract playbook is a great tool to read difficult contracts quickly, carefully and comprehensively.  I recommend it to anyone who needs to review a lot of documents.

Tags: ,
  • Comments Off on Reading Agreements Critically with a Contract Playbook

Making SaaS out of a Services Agreement

February 20th, 2010

Many software companies build products that live on the web and don’t install on local computers at all.  Enterprise-focused companies call this SaaS; everyone else just calls them web-based or hosted services.

Either way, developers of these products sometimes look for customers among big companies.  It is really common then that the customer’s contracts manager doesn’t quite get the nuances and sends over some kind of Master Services Agreement to document the deal.  Those agreements are generally based on the idea that the vendor is providing a specific, custom deliverable and don’t fit the situation very well.  I have been through this drill a lot and have a few observations about some of the important differences between a custom services and a SaaS deal.

1)  Work for hire language.  A Master Services Agreement will almost always say that the customer owns all technology and works created by the SaaS vendor during the course of performance.  This would be true if the vendor was writing custom software, but is the opposite of what the vendor wants in a SaaS situation.  This should be replaced with something that says the vendor owns all the software and anything developed during the term of the contract, and that the customer has a license to use all of it (subject to payment of all fees).

2)  Service levels.  The Master Services Agreement may not have any service level terms, such as an uptime guarantee or detailed procedures for responding to service errors.  This can work out well for the vendor since it allows more flexibility and avoids difficult conversations about discounts if the service goes down.

3)  Source code escrow.  Some companies feel strongly that if an important vendor goes out of business they should be able to take over the source code to preserve continuity.  With SaaS products these terms are especially inappropriate because the service is hosted- a customer would have to take over the entire service rather than just getting the source code to maintain an installation at its own facility.

4) On-site services.  Master Services Agreements can use a lot of ink on issues like vendor behavior on the customer’s premises and the customer’s ability to replace vendor personnel.  This comes out of the idea that vendor personnel will be in the customer’s data center regularly, which is not correct in a SaaS relationship.  I watch out for language that is really egregious here, but mostly try to leave this stuff alone since it just doesn’t apply very often.

The point of this post is that a Master Services Agreement is the wrong tool for the job in a SaaS deal.  From the vendor’s side, some terms definitely need to be changed, while others are not applicable but can be left mostly alone.  I always try to make the minimum set of changes that will let everyone sign the deal and get the relationship underway, while making sure there is nothing in the agreement that can come back to bite my clients later.

Tags: , ,

IP Law for Startups Blog on Bratz vs. Barbie IP Dispute

February 15th, 2010

I recently started reading Jill Hubbard Bowman’s excellent IP Law for Startups blog.  I don’t practice IP law, but a lot of the work I do touches on intellectual property issues so I find her posts helpful and illuminating.

The “moonlighting” problem is pernicious for startup entrepreneurs.  It can take months or years to nurture an idea to the point where it can pay a salary, so it is natural for many people to chip away at their plans while earning a paycheck somewhere else.  The problem is that if their idea is closely related to their day job activities, and if they are not extraordinarily careful to avoid using work resources for the side project, then their employer can claim ownership of the new business ideas.

Jill has a great example up on her blog based on the Bratz dolls.  You should click through to read the whole thing (and subscribe to the blog), but some key facts include:

* $1 billion in claimed damages

* $100 million in legal fees for defendants MGA Entertainment, Inc. and Carter Bryant.

Ouch.

Tags: ,
  • Comments Off on IP Law for Startups Blog on Bratz vs. Barbie IP Dispute

Compare/Contrast: Microsoft vs. Google vs. Yahoo Search API Terms of Service

September 14th, 2009

Pete Warden is an entrepreneur working on ways to find the value in one’s social networks through his company Mailana. We’ve only met online, though I hope one day we can connect in person because I like what he’s doing a lot.

Pete blogged last week about why he switched from Yahoo’s search API to Bing to Google. I wouldn’t know a REST interface from a stick in the ground, but he makes a point about terms of use where I can definitely weigh in.  For kicks, I looked up the terms of use for Yahoo BOSS, Bing and Google search APIs.  It is fascinating to me that the terms are substantially different.

I won’t go into all the differences in great detail and readers certainly should not take this listing as comprehensive in any way, but for example:

Delivery of Search Results.

Google cares a lot about this.  They say that developers can not reorder search results or intermix results from other sources. No surprise here; integrity of search results is key to public acceptance.
Bing is almost identical to Google. 
Yahoo
asks developers to acknowledge that reordering may affect “relevance or performance” and leaves it to the developer to decide what to do about it.

Yahoo really surprises me here.  I read the TOS 4 times to be sure I wasn’t missing something, but they seem to accept a laissez faire approach that would let me reorder search results or insert paid listings.  There is some language about the way queries and search results should be presented that might be read to limit this a little, but it is nowhere close to Google or Microsoft’s blanket proscription.  It is also possible that some other document adds this restriction, but I couldn’t find it on quick review.

Integration with other products.

Google says that search results can only be overlaid on Google maps and that Google retains the right to insert ads in search listing, which is a fairly narrow set of restrictions.
Yahoo puts a blanket prohibition of use of any Yahoo APIs “in a product or service that competes with products or services offered by Yahoo!”.  That seems incredibly broad and hard to understand to me.
Bing mentions MSFT’s Virtual Earth maps, but doesn’t make a big deal of other online products.

I am a little surprised that Google doesn’t mention any of its other products, but maybe there are technical reasons around use of the APIs that make it unnecessary.  Yahoo has so many properties doing so many different things (and Microsoft so few) that the language on this item doesn’t surprise me at all, though I wonder how a developer could possibly know its product doesn’t compete with some Yahoo product somewhere.

Content.

Yahoo offers a long list of content its APIs can’t be used to promote, including spyware, cigarettes, illegal drugs and paraphernalia,  pornography, prostitution, body parts and bodily fluids, and professional services regulated by state licensing regimes.
Google tells developers not to upload, post, email, transmit or make available inappropriate, defamatory, infringing, obscene or unlawful content.
Bing says only that developers may not “promote or provide instructional information about illegal activities or promote physical harm or injury against any group or individual”.

Bing is the clear winner here for porn sites in need a search API.  Google runs a close second with its local-standards-dependent “inappropriate” and “obscene” restrictions, and Yahoo is by far the most family-friendly search API.

On a serious note, it looks like Yahoo would not allow my law firm to use its search API on our web site.  I can’t see the rationale for this whatsoever, but the point is duly noted.

This was an interesting exercise.  Search products look awfully similar from the outside and it is easy to lump them all in a basket.  The companies behind them have different motives for making the APIs available and it is instructive to review the requirements.

Reblog this post [with Zemanta]
Tags: , , , ,

Digital Rights Progress in the So-called Internet-Speed Era

January 1st, 2009

I just watched this video of Lawrence Lessig’s talk in 2007 at the TED Conference (thanks LA). It gives a brief history of copyright and recorded media, going back to John Philip Sousa’s vehement opposition to the very first audio recordings for fear that they would cause people to stop playing music and singing on the porch at night, and eventually lose their vocal cords entirely  (!).

The thing that really grabbed me was a fight between ASCAP and upstart copyright clearinghouse BMI in 1939.  ASCAP have the “top shelf” artists and recordings locked up, but was so afraid of radio that it kept raising royalty rates beyond what any broadcasters were willing to pay.  BMI had second-tier content, but its pricing was better so it got its music on the radio and forced ASCAP in 1941 to cave in to the new radio-driven marketplace realities.

Contrast this with the RIAA today.  They have been fighting online distribution of music for 10 years now (the Napster case was decided in 2001) and the battle shows no sign of ending soon.

The issues are different and more complex these days for sure (where *exactly* is the line between fair-use mashups and flat-out copying songs without paying for them?),  but still- it’s gone on far enough.

One of Lessig’s best points is that the battle has created two extreme polar mindsets: the “sue ’em all” studios on one side and the “all music should be free” zealots on the other.  Let’s just agree now that digital music is going to cost less than it did on CD, most people will still pay something for it and a few will persistently refuse.  Then we can all focus on finding new and interesting ways to increase the ratio of buyers to non-buyers instead of harassing bands’ biggest fans.

Reblog this post [with Zemanta]
Tags: , , ,
  • Comments Off on Digital Rights Progress in the So-called Internet-Speed Era

Twitter Username Conflict and Password Function Creep

December 22nd, 2008

My friend Steve Poland blogged a few days ago about the experience of losing his @celtics Twitter account.  The story got picked up on Techmeme and made the rounds on the Internet, which was a wondeful thing.  It sounds as though the Boston Celtics decided they wanted to try out Twitter, saw that @celtics was taken and successfully petitioned Twitter to yank it from Steve.

I feel bad for Steve not so much for the fact that the name was taken from him as for the way it was done.  He posted the notification email from Twitter and it was blunt, unsympathetic and offered no recourse to someone who believed he had been wronged.  There are good ways and bad ways to convey a message and if ever there was one likely to inspire a rant this was it.

The consensus from around the Internet agrees here, and says that while everyone understands intellectually that Twitter owns user names (unlike phone numbers or domain names) there should be a fair review process.  Steve has a great example in @STP, his personal Twitter account and also the name of a brand of motor oil.  Steve never Twitters about motor oil that I am aware of, so by Twitter’s own rules there is no “impersonation” happening and Twitter should not be permitted to take the name away.

But what if it does anyway?  And what if Steve also has “STP” accounts on 17 other social media sites (or every one listed at Username Check)?  As the social media business figures out how to charge people for services I wonder if someone needs to step up as a global user name mediator so that individuals and companies don’t end up fighting the same battle in multiple forums simultaneously, where they might well win some and lose some.

Twitter seems to have jumped way up in the public consciousness recently.  I imagine they are dealing with a lot of these issues right now.  I bet they wish they could hand them off to someone else as well.

And as long as I am on the subject of Twitter growing pains,  I am fervently looking forward to the day I don’t have to give my Twitter password to every site that wants to plug into my account.  Erik Heels recommends changing Twitter passwords regularly, probably for this very reason.  I am going to have to write down all the places that have my Twitter credentials so that I can start doing that.

Tags: ,

Open Source Angst

September 10th, 2008

I started poking around in some open source software issues recently, and then a significant case came down on almost exactly the same point, making the whole thing highly blog-worthy.  Here are my thoughts on the Ninth Circuit’s Jacobsen v. Katzer decision along with the clusterf*ck of conflict between developers and lawyers on how to manage open source code.

Jacobsen v. Katzer – Open Source Licensing Requires Compliance with Attribution and Version Terms

The Jacobsen case contains a valuable lesson. Jacobsen developed software and made it freely available under the under the Artistic License, which says that a licensee is free to use the software and incorporate it in free or for-pay products, but that the licensee must provide full attribution of the licensed material and if the licensee changes aspects of the source files he is required to make the original versions available as well along with a description of the changes.

Katzer picked up Jacobsen’s code, changed files names and other aspects and used the modified versions in his own for-pay software without giving attribution or providing original versions as well.  Jacobsen brought suit for copyright infringement.

Katzer then attempted some legal sleight of hand by saying that the license to Jacobsen’s software allowed Katzer to use the software freely.  The attribution and version terms were not actually part of the license, but were a separate contractual issue.  In other words, if Katzer screwed up, the remedy was not to rescind the license but to pay economic damages.  Since Jacobsen didn’t charge for his product, damages were $0.

The court’s response was “No way”. The attribution and version terms are part and parcel of the license.  Fail to comply and you lose the right to use the software.

My View – Right on, Ninth Circuit

The court has this right.  If it had somehow found for Katzer it would have ripped the heart right out of open source licenses by saying that there is no penalty for failing to comply with the attribution and version control provisions- frequently the only conditions in an open source license agreement.  The license conditions would be completely unenforceable.

[Note, however, Prof. Eric Goldman wondering whether, if the act of downloading and using the code subject license terms is enough to create a defensible contract]

. . . And Yet the Devil Remains in the Details

At the same time, I have worked with companies that use open source code regularly.  They don’t just use one component- they use dozens or hundreds of open source elements by different authors, made available under different license terms.  Good faith, meaningful compliance becomes genuinely difficult in that situation and requires careful documentation, oversight and management.  No problem there- good developers and good lawyers both create clear trails of documentation to support their work product and tracking the elements being used is doable.

What may not be doable is figuring out exactly what the license terms are.  I searched for several open source elements on a recent project and found them available on two web sites.  The first site listed the applicable license as GPL (a more restrictive open source license) and Artistic License (less restrictive).  The latter said GPL or Artistic License.  GPL and Artistic License are similar, but have some important differences.  Which one did the publisher intend to apply?  There is no way to know from the sites on which the code resides.

[Again, see Prof. Goldman with an example of a photo posted on Wikipedia under the mutually incompatible Creative Commons and GFPL licenses and wondering how one might comply with the license requirements.]

Open source licensing also borrows from the software community by attaching version numbers to its licenses.  GPL v3 is signficantly different from GPL v2, but developers frequently don’t indicate which version they intended to apply.  As a good faith user, do I need to comply with both versions of the license?  That doesn’t seem to help the open source cause much- it is hard to upgrade to v3 if we need to remain backward-compliant with v2 indefinitely as well.

Where the Developers Miss the Lawyers

My own theory here, and I would love to hear other views, is that the license terms are an afterthought for developers.  Someone creates some code, uploads it to sourceforge or elsewhere and checks a box for GPL, Artistic or some other license terms.  I believe that in most cases developers would like attribution and to see their code further developed by the community, but don’t care much about the details beyond that such as which version of GPL should apply.

All of this makes good faith compliance really difficult.  The Software Freedom Law Center has an excellent guide to compliance with GPL that provides very good advice on how to document and comply with GPL’s requirements.  The document assumes, however, that a good faith user can readily tell which licenses to comply with.  In my experience that is not the case at all, which is a shame.  Open source software is useful and pervasive, and is being enforced with more and more assurance.  It will be too bad to see well-meaning companies dinged because of this lack of clarity.

Tags: ,
  • Comments Off on Open Source Angst

Two Quick Links from a Week (Mostly) Offline

April 23rd, 2008

A family vacation and a few important pieces of work that couldn’t be postponed meant that this blog got short shrift last week. Here are a couple of great tidbits from the blogosphere that I was finally able to focus on since getting home.

HBS Working Knowledge – Who Owns Intellectual Property?

Harvard Business School’s Working Knowledge newsletter has a good read on intellectual property in the digital age. It should really be called “How Do You Adapt When You Know Your IP is Going to Be Co-opted?”. Among other points, it notes that the (RED) campaign was expressly designed to be picked up freely by companies. The implication seems to be that it is similar to the GPL concept in software, where the license is free, but users of the software are restricted in what they can do with it downstream. In GPL’s case, the end product must generally also be free. In (RED)’s case proceeds must go to The Global Fund. Whether this is true or not, it is a nice example of an effort to promote viral growth of a brand among businesses as well as consumers.

I note as well that the HBS newsletter has conflicted feeling about the ownership of its own content. Most articles do not allow comments; a few are expressly designed to invite them. This article, appropriately, is one. HBS gets good comments. It should allow them more frequently, even if it meets losing some control over the content it puts out.

E-Commerce Law: Federal Court Upholds YouTube’s Terms of Use

This one is a bit wonkier. The relevant facts are that someone sued YouTube in Washington State even though the Terms of Use on YouTube’s site (you’ve read them, right?) specifically say that actions must be brought in San Mateo County, California. The court said that by using the site, plaintiff Bowen had agreed to the terms, including the choice of law provision.

This is another data point in the ongoing “legal discussion” of the validity of shrinkwrap, clickwrap and web site terms of use provisions. There is no ability to negotiate terms in any of these situations, so there is always some question whether certain provisions over-reach. In this case, the court decided that Bowen had expressly agreed to the terms with knowledge of them, and the San Mateo provision was therefore valid.

I still haven’t actually read the case, so I will reserve judgment on the facts- esp. whether Bowen was *actually* aware of the terms of use, or whether he just clicked “yes” at the appropriate moment.  If the former it’s caveat emptor (visitor?) unquestionably, but if the term was in there and he clicked yes without really reading then this case doesn’t move the line at all reasonableness of non-negotiated click-through terms.

I like that, I should say.  Non-moving lines are extremely helpful to those of us that depend on clickwrap and clickthrough agreements to get products in the market.

Tags: , , ,
  • Comments Off on Two Quick Links from a Week (Mostly) Offline

IP Protection – “Take No Chances” Department

March 4th, 2008

I recently received a standard form of license agreement from a prominent technology company that featured the following paragraph:

I can’t remember when I have seen IP rights applicable throughout the entire universe. Let’s just hope they can read PDFs around Alpha Centauri. And that the Alpha Centaurians will sign on to the Paris Convention governing reciprocal trademark rights- that is, after the laser-coded version of the agreement beamed their way has actually reached them.

Tags: ,
  • Comments Off on IP Protection – “Take No Chances” Department

Trademark Law as a Weapon to Stop Online Forum Discussions

March 3rd, 2008

Prof. Eric Goldman of Santa Clara University is a reliable source of updates on "Internet law".  This is a good summary of a tough situation:

Technology & Marketing Law Blog: Lifestyle Lift Tries to Use TM Law to Shut Down User Discussions; Website Countersues for Shilling–Lifestyle Lift v. RealSelf

LifeStyle finds itself being maligned in RealSelf’s online forums.  Established law says that RealSelf can not be held liable for statements made by third parties, so what’s an aggrieved business to do?

Lifestyle Lift goes after the forum owner for misuse of its trademarks.  The argument is mostly a dog- one can use another’s trademark to identify the business it relates to, but not profit from the mark.  The expense of litigation, however, usually makes people decide that removing the allegedly-infringing content is a better course of action.

RealSelf doesn’t do that though.  It gets made and countersues for . . . violating its terms of use.  The claim is that Lifestyle Lift posted "shill" reviews of its own product (the horror) in violation of RealSelf’s terms.

RealSelf may well win on the merits of the infringement claim, but it’ll still be out a bunch of cash on the defense, and the breach-of-terms-of-use counterclaim isn’t going to bring a whole lot of that back.

I don’t know any of the underlying facts of this case (were the critiques accurate?) so I won’t take sides.  As a UGC junkie, I am strongly in the camp that people should be free to post their opinions of products, including negative ones. There are limits, though.  Businesses also need ways to protect their reputations against untruthfulness and outright slander.

Tags: ,

Next »