Tag: startup lawyer (Page 1 of 3)

Famous Last Words: “The Shorter the Better”

Over the years, I’ve lost track of the number of times I’ve sat with or been on the phone with a client and we went over the deal they were trying to close (or more often some part of the overall deal), where they said “We just need something short to memorialize this, preferably a one page agreement.”

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Clickwrap License Cases: Patterson v. Compuserve @ Paper This Deal

Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996).

Patterson, a resident of Texas (a lawyer and software programmer), sold his own software to third parties over Compuserve’s system, pursuant to the terms of a clickwrap agreement (where he had to type “I Agree” into various sections of the agreement).

Compuserve began to sell its own software that was similar to Patterson’s and Patterson demanded Compuserve pay him $100,000 as a settlement.  Compuserve then filed a declaratory judgment action in Federal court in Ohio.

Patterson moved to dismiss the action due to alleged lack of personal jurisdiction, claiming he never visited, did business in, or consented to suit in Ohio.

The Sixth Circuit found that making Patterson subject to suit in Ohio due to his acceptance of the clickwrap agreement, a Shareware Registration Agreement, did not violate the due process clause of the United States Constitution.

The Court reasoned that Patterson personally availed himself to do business with Compuserve, and made money doing so, and could therefore have reasonably expected he’d have to defend himself in Ohio due to the terms of the agreement.

Best Practices for Drafting Browsewrap and Clickwrap Agreements @ Paper this Deal

There’s still some hostility from the court system, and the public at times, on the enforceability of browsewrap and clickwrap agreements. Having an enforceable license for your website, software or mobile application is of the utmost importance.

The ABA Committee on Cyberspace Law provided general rules to ensure your online agreement is enforceable:

  1. The user must have adequate notice that the proposed terms exist;
  2. The user must have a meaningful opportunity to review the terms;
  3. The user must have adequate notice that taking a specified, optional action manifests assent to the terms; and
  4. The user must, in fact, take that action.

I fully agree with the above.  Notice, notice, notice is so important. But not just any notice.  You need to ensure that the notice is reasonable, that is that a reasonable person using your software/website/application would understand that by taking a certain action (clicking or continuing use of the site) it renders the agreement binding on them. My reading of the case law on shrinkwrap, browsewrap and clickwrap agreements made me come up with my own list in addition to the ABA Committee’s pointers:

  1. Create an easy to read, reasonable license that follows industry norms;
  2. Give the user reasonable notice that the license exists;
    • Make sure the notice is CLEAR AND CONSPICUOUS
    • Colors, size, font, placement, timing, etc. all relevant. Don’t “bury” it.  Get it in front of the user’s faces.
  3. Let the user read the full license if he or she so chooses (scrollable pop-up being preferred), prior to acceptance (click or use);
  4. Opt for clickwrap over browsewrap if possible.

 

 

Clickwrap and Browsewrap Agreements Kickoff @ Paper this Deal

I’ve been involved in drafting numerous versions of online agreements, including privacy policies, service agreements, pricing policies, various other policies and last but not least both browsewrap and clickwrap agreements.  I’ve done a quick post on case law with respect to browsewrap and clickwrap agreements in the past, and was recently asked to speak for a webinar entitled Drafting Clickwrap and Browsewrap Agreements: Advanced Strategies for Enforceable Online Contracts held by Strafford.  If you’d like to listen to the webinar email me or contact them.

I feel that more and more contracting is going to be done over the Internet in the future and I am going to start a series of blog posts on drafting these types of browsewrap and clickwrap agreements as well as case law in the area, which serves to let corporate lawyers know how they have to draft the agreement, and have the users accept it.

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Use your Retirement Plan to Fund your Startup @ Paper this Deal

First of all, I won’t advise anyone to withdraw their 401(k) funds early as the tax hit the IRS enacts is insane.  If you are thinking about doing that, please don’t, or at least don’t do so until you’ve spoken to your accountant.

This post will, however, detail how to use your qualified retirement plan or IRA to start a new, or buy an existing, business.  This name given to the process I’ll discuss is rollovers as business startups (“ROBS”).  The main gist is that an individual’s current retirement plan is rolled over into a newly established 401(k) plan sponsored by a startup company and then used to purchase the startup company’s stock.  The ROBS arrangement allows income taxes and penalties (see IRC Section 72(t))to be avoided because it is a rollover from one qualified plan to another.

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New York’s STARTUP-NY Program @ Paper This Deal

Starting at the beginning of 2014, New York’s STARTUP-NY Program went live.  Here is the official website for the initiative.  Its goals are laudable but its only available to a small niche of companies.  If your company qualifies, however, the benefits are rather nice.

In summary, the Program provides eligible companies with free office space (at certain locations) for a period of time and the employees of the company pay no state income tax on their income (at least for the first five years, with a small amount possibly paid in years 5 through ten).  The Program is attempting to lure out-of-state companies into New York, while encouraging sprouting of new startups that otherwise may not have started without these benefits.  Overall New York is looking to add more jobs in the state, and the more jobs now (even with tax breaks) the more taxes the state can collect in teh future. 

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Enforcing Online Terms of Use: Clickwrap vs. Browsewrap Agreements @ Paper this Deal

I’ve discussed why every website owner needs to have an effective Terms of Use and/or Service Agreement (also called an End User License Agreement, but you can call it what you want).  Now I want to briefly hit on how the provisions of the Terms of Use can be enforced under New York Law.

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Domestic International Sales Corporations @ Paper this Deal

If you export products for sale of any type and don’t know what an IC-DISC (or simply a DISC) is, or think it’s a round piece of plastic you put in your computer’s drive, then keep reading.  Any United States business with qualifying export sales can save a large amount of money with the use of a Interest Charge Domestic International Sales Corporation (referred to hereinafter as a “DISC”).

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Intrastate Securities Offering Exemption @ Paper this Deal

I wanted to blog on some of the lesser known and relied on securities exemptions.  In certain situations they can be very helpful.  One of these is the federal Intrastate Securities Offering Exemption.  Simply, if you offer and sell in one state and one state only, and some other factors are met, the issuer is exempt from the federal registration requirement.  Blue sky laws will still apply but some states have limited offering exemptions or other exemptions the issuer can rely on.

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The Basics of Copyright Protection @ Paper this Deal

Copyright protection was first introduced in way back in 1790, and it has changed a lot over the years.  Despite substantial revisions today’s copyright laws still protect owners of original works, however, it is now applied to many different types of works  (i.e. websites, source code, etc) than existed hundreds of years ago.  Luckily the creators of the copyright protection drafted it so that an original espression in any “fixed medium” is protected.  This allows the law to evolve as does technology.

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