Tag: Syracuse

Clickwrap License Cases: Patterson v. Compuserve

Internet Law, Licensing, Online Agreements

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.

Clickwrap and Browsewrap Agreements Kickoff

Copyright, Intellectual Property, Internet Law

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. Read more

Use your Retirement Plan to Fund your Startup

Business Entity Formation, Financing Your Business, Startup Formation, Stock, Tax

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. Read more

Ten Tips for Pitching your Startup to Investors

Accredited Investors, Angel Investors, Financing Your Business, Investors, Securities, Venture Capital

I volunteer at a couple of small business incubators and programs.  I was sitting in on a mock pitch last week and giving some pointers on how the entrepreneur could polish their pitchdeck and overall presentation. I figured I’d put these up so people can take a look.  The below are offered to any startup looking to raise money: Read more

New York’s STARTUP-NY Program

Employees/Contractors, Startup Formation, Tax

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.  Read more

Securities Laws as applied to Virtual and Online Items

Securities, Stock

There’s been a lot of discussion about whether online or virtual accounts can be deemed securities under the U.S. federal securities law.  The most well known at the moment is Bitcoin.

A case was just decided where the court found that Bitcoin was a currency.  Based on that fact, and that the protaganist in the case was offering a money making scheme (you put in money, wait and make more money off Bitcoin), the scheme was subject to the securities laws.   We’ll have to parse out the holding.  The court did not hold that the Bitcoin itself is a security, but rather that Bitcoins are a type of currency – because they can be converted into currency (which I’m not sure I agree with – any commodity, product or item can somehow be converted to currency – and the distinction between selling and converting seems like a big deal). Here’s the link to the case, its actually rather short and sparse on legal analysis for one that makes such huge leaps in legal doctrine as applied to a concept which the court is probably not overly familiar with.  The old adage that bad facts make bad law seems to be the culprit again, as the scheme the guy in Texas was attempting to pull off was not something a judge would let him off on.

I’m pretty sure this isn’t the last we’ve heard of the SEC v. Bitcoin debate.  Mark it up as SEC 1, Bitcoin 0 so far, unfortunately.

I’ll give a breakdown of the securities laws and how they could be, and have been, applied to virtual goods, online items, and currency, including Bitcoin (which I’m not conceding is technically a currency). Read more

How to form a Single Member LLC in New York State

Business Entity Formation, Choice of Entity, LLCs, Startup Formation, Tax

There are a lot of small businesses out there operating as sole proprietorships, that is they operate the business through the individual(s), and there is no formal entity.  Many sole proprietors tell me that they’ve filed a d/b/a with the local county (here, the counties of Onondaga, Tompkins or Monroe), and therefore believe that is all they need to ensure that they are not personally liable, but this is not correct.

The main reason people incorporate or organize LLCs is to limit liability.  Debts and contractual obligations are not something that you want to owe personally if you can avoid it.  Setting up an LLC will create a seperate legal entity from yourself that you will operate the business through, own business assets, and contract through.  Not much has to change when you form a single member LLC.  LLC’s are also useful because the IRS will let you choose how you want the LLC taxed (either as a disregarded entity, S corp or C corp).

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