licensinghandbook.com

Who can audit?

2009-11-09T19:23:38Z

I posted the question on Twitter the other day: “How does the SPA have the authority to audit software license use? In thousands of licenses I’ve never given them that right.”

I was looking for some insight that I might have missed. In the world of contracts, your license actually will specifically state who has the ability to audit your license usage (if they have the right at all). And in the world of law, the term “standing” is used to show who actually is allowed to raise a particular issue (via the courts, etc). So the SPA/BSA/SIIA (SIIA is their current incarnation) (or any other third-party “enforcer”) wouldn’t have the legal right to ever come in and audit your software license use unless there’s language in the license that allows for such audit.

Even general audit language is probably safe to prevent the SIIA from knocking on your door one day. Typical audit provisions include:

explanation of who can come to audit (it usually says that the vendor has the right to audit)
time-frame of any audits (I typically am very clear to limit audits to 1 time per calendar year)
notice for audits (even bad audit language usually says that the vendor has to notify the licensee of the intent for an audit)
who besides the vendor can come audit (if 3rd parties are allowed, I limit to a “big-four” accounting firm and have NEVER been challenged on this limit)

The result is that even with not-so-favorable audit language, I simply don’t see how the SIIA has any right to come and perform an audit, let alone try to sue a licensee for license violations (again, any license that has “no third-party beneficiary” language in it could be used to very clearly show that the SIIA doesn’t have any rights with respects to the license).

Additionally, it’s been suggested that there are two other routes to allow such an audit: the “source” (the licensee’s employee who reports a violation) and the potential for an assignment of audit rights. As for the source person, unless they’re also the person in the company who can allow someone to come in, that individual probably doesn’t have internal authorization to allow the audit to happen – so I find this unlikely. The assignment of audit rights potential does exist, and contracts that have poor assignment language could potentially allow the vendor to assign their rights to someone else (and, in fact, it appears that the SIIA attempts to use an assignment of rights in this manner). So it’s conceivable, but I’ve never seen the language used in that way.

At the end of the day, the lesson is this:

Have strong audit language which clearly states who can perform the audit, on what time basis they can audit and what the results would mean (ie: usually you don’t have to pay any form of penalty unless usage exceeds 10% of the licensed quantity – but you’ll always have to pay for the difference in usage). Include notice provisions and be very clear about whether the vendor can outsource their auditing… many will use large auditors, which is fine, but you don’t want Andy’s Audit Shack to be performing the audit. Lastly, if you’re maintaining any kind of uber-confidential information (like SSN’s, bank account numbers, etc), then I would also be clear about what kinds of auditing tools can be used to complete the audit, as many vendors like to install their own auditing software onto your network.
Have clear assignment language which prevents EITHER party from assigning the agreement without the other party’s consent (not to be unreasonably withheld, if you so choose): “Neither party may assign or otherwise transfer this Agreement or any of the rights hereunder, without the prior written consent of the other, which consent will not be unreasonably withheld or delayed.”.

OK – so you’ve done the prior two things and the SIIA comes knocking (physically or with a letter requesting/demanding an audit). What do you do? Simple. Deny them access – in writing. They’ll threaten, similar to the Big Bad Wolf, to huff and puff and to blow your house down. But if you’ve got things properly documented, the SIIA simply doesn’t have the legal right to audit. It doesn’t matter whether the vendor they’re supposedly auditing for is a SIIA member. It doesn’t matter if they claim to have permission. (Oh, and interestingly enough, if they name names and tell you which vendor sent them to you, I would check your license agreement with that vendor because many vendors like to include confidentiality restrictions which prohibit either party from even identifying the other.)

Now, regardless of everything I’ve just told you, I also firmly believe that you should always be 100% compliant with your contractual obligations. So use some form of license management tool to know that you’re only using what you’re licensed to use.

The Licensing Handbook Blog is the companion site to the Software Licensing Handbook. Covering licensing topics on a regular basis, Jeffrey Gordon attempts to offer advice, add humor and sometimes even a bit of wit to a practice that most people find abhorrent – namely, reading a contract from start to finish. Follow me on Twitter if you want up-to-the-minute information on contracting, licensing, negotiation and the law.

Software Licensing Handbook now available as an eBook

2009-11-07T00:46:22Z

I know, I know… welcome to the 20th Century, Jeff. I was waiting for my publishing “house”, Lulu, to allow for an eBook edition, and we’ve finally got it.

So, if you have been waiting for the eBook version of the Software Licensing Handbook (I’m matching Amazon’s price for the paper version, so get it cheaply now), you can get it here.

What Can’t You Not Do?

2009-10-27T13:12:46Z

Over on her Ask a Manager blog, Alison Green today discussed those personality traits which force you into certain behaviors, resulting in career choices that are almost imperatives. It’s an interesting thought – are there things that you MUST do to satisfy your own internal itch? But then I started thinking about how that would affect the world of negotiation and it ties back into a conversation thread that’s been started many times: are certain people more predisposed to being better negotiators? And, on the flip side, are there people who shouldn’t, under any circumstances, be the negotiator for your firm/organization/self?

Typical negotiation trainers (Karrass, for example) predicate their training materials on the belief that anyone can learn how to negotiate. Even my favorite professional negotiator, Herb Cohen promises in his book that “You, too, can negotiate anything!”. But don’t let the razzle-dazzle fool you. The honest truth is that while everyone can learn techniques to increase their negotiation skills, not everyone can be a good negotiator.

“Wait!” you yell at me – “YOU offer negotiation training, too. Aren’t you just taking people’s money like everyone else?” Woah. I’m not rendering judgment on the value of the service offered by negotiation trainers… lots of the material learned in these courses is excellent stuff. Heck, even bad negotiators can improve by learning my Five Fundamental Skills for Effective Negotiation. What I’m saying is that a prospective negotiator needs to be introspective enough to know whether they’re a good negotiator (and sometimes, it’s even case-specific).

So then, what makes someone NOT a good negotiator? Well, as I just said, it can sometimes be case-specific – I, for example, shouldn’t negotiate the purchase of my own house or car… I’m too emotionally invested in the result. But more generically, bad negotiators are:

ignorant (choosing to be without knowledge – would rather shoot from the hip)
overly-emotional (it’s one thing to be “disappointed” in a result… another to be “sad”)
hot-tempered (NEVER lose your cool – in fact, keeping cool when the other side is purposefully pushing your buttons is a great skill to have)
impatient (negotiations can take a LOT of time and you have to be willing to wait things out)
know-it-alls (the flip-side of ignorance is just as dangerous)

What am I saying, then, if you have these tendencies? Well – either alter your personality (which proves quite hard for the bulk of the population) or find someone else to do the negotiating. Remember that bullying someone (which is what a lot of these traits manifest as during a negotiation) won’t get you what you desire and might leave you worse off than when you started.

Oh – you don’t like the implication that everyone can’t be a great negotiator? Blast me in the comments.

The Power (and Value) of “No”

2009-10-13T13:59:35Z

Yes/No. Yin/Yang. Right/Wrong. It seems as if there are a lot of ways to say that in many decisions, we have two basic potential responses (and many other shades of gray in between). Answering “Yes” almost always involves more work, more responsibility and more hassle. So why don’t we choose “No” more often?

As human beings, there is research to suggest that we want to generally appease others at a very fundamental level. This isn’t about conflict management, it’s simply about survival and the power that comes with “the return of the favor.” It’s even got a political science term that sounds awfully legal: “social contract” – that the individual give up some flexibility of behavior in favor of the larger societal good. But realize that there is a quid pro quo here, we expect something in return.

It’s important, however, to learn the power and value of saying “No.”

At your individual level, “No” might mean that you have more time to devote to your already-full plate of things you’ve said “yes” to. At the societal level, “No” means that you are recognizing participatory limitations – that you believe that you have already contributed (or are contributing) to the “group” (however you would like to define it at that particular moment). Without realizing it, you actually do a form of “hedonistic calculus” to determine the effect of saying No and formulate defenses in the event you’re challenged.

But it’s not wrong to say No – and there are a lot of benefits to saying “No” with compassion and clarity.

While you may be refusing someone something that they want, and as I reminded someone the other day, you’re no good to anyone (including yourself) if you’re not able to do what you have already committed to do. Saying “No” is a defense mechanism and allows you the ability to regulate your workload. But, it’s also a starting point (as pointed out by Jim Camp in “Start with No!”) in that only if you say “No” do you have a place to begin a conversation.

Which means that from a negotiation perspective, “No” is a wonderful way to begin when asked for any settlement. Camp believes that it’s the ONLY starting point – and he says on his website that starting with no is to “gain control of the deal.” Whether you believe that’s true (or even if you want control of the deal), he is right that without saying “No”, there isn’t a conversation or negotiation at all – saying “yes” is merely a statement of agreement.

Saying “No”, however, doesn’t have to be done in a mean spirited manner and doesn’t have to be used with force. Rather, the manner in which you say “No” can convey almost any conceivable emotion and can even foster a reciprocal compassion for your need/desire to say “No.” For example, I was asked the other day to complete some new work for an old client on a quick-turnaround basis.

I responded saying that while I wanted to complete their project, I didn’t have time to get it done on their schedule because I was going on a babymoon with my wife. In other words, I said “No.” But of course, I didn’t only say “No.” My next sentence was to give them the option for me to complete the project upon my return. When they learned that my wife and I were expecting and because they understood the desire to take a last vacation before the baby arrived, they were sympathetic to my reason for saying No – and in fact, their time schedule really wasn’t as inflexible as they first made it appear. In the end, I will get to enjoy my babymoon, I will complete their work promptly upon my return and they’ll have their needs met as well. [By the way, the ability to say No is founded upon proper use of Information Gathering skills.]

By saying “No” I was actually able to get everyone what they wanted. Try it yourself and let me know how it works in the comments!

New Client Availability

2009-10-11T00:58:32Z

I have a single vacancy in my client list that I’m looking to fill.

My clients are typically organizations that fall into one of three obvious categories:

small organizations who need a contract negotiator for individual large deals;
medium-sized organizations seeking to create a contract management team; and,
large organizations who can benefit from strategic advice to bolster their internal staff resources.

So, if you or your organization have been considering contract renegotiation strategies or mitigation work based on risk management assessments, now might be a perfect opportunity to take advantage of the current economic situation. Additionally, I can provide a VMO-in-a-box (the creation of all things necessary for the implementation of a vendor management office) or simply act as a sounding board to make sure that you’re extracting all of the value possible from each deal.

Contact me today if you’d like to use my knowledge to your advantage.

This Week on The Web 2009-10-11

2009-10-11T01:06:49Z

These are the discussions that happened around the web this week – maybe you already read about them, maybe you need to again. Come join the party on twitter (follow me here and you’ll participate in the conversation live.)

I also realized that many of you might have no idea what you’re seeing below. Sorry. These are “tweets”, 140 maximum character messages sent via Twitter. Within the Twitterverse individual users follow others and have followers (think of it like overlapping Venn diagram circles). To read a tweet, you have to wade through a bit of jargon used to make the most of the 140 character limitation. “RT” for example, is shorthand for “Re-tweet” and the @____ is the username of some other individual on Twitter. Combined together, then, “RT @_____” means that someone else wrote a tweet that I found important and I now want to forward along to my followers. The URL’s are then also shortened by shortening services like bit.ly to make the most of the character limitation, too. Lastly, you might see “hash” identifiers “#______” which are ways to tag tweets of a particular flavor for easy searching later and “<” which means that I am commenting on what came before it.

RT @TradeSecretLaw: Vary the Speed and Timing of Your Negotiations for a better deal. http://bit.ly/XP5W9 < Good. Are there better examples?
RT @johnlwatkins: New blog post: Why Judge’s confidentiality rule may increase arbitration and mediation. http://bit.ly/j9PYj
RT @TOpatentlawyer: Microsoft patents a way to make more money from MS Office http://ow.ly/tGOg (via @slashdot)
RT @dahowlett: Qu: do software buyers make rational decisions? Methinks ‘not often.’
The Cloud Computing Consultant: http://bit.ly/2lSgVQ (via @dealarchitect) < Hilarious and NSFW.
MS attempts to patent software licensing based on time: http://bit.ly/kRcsO < I hope there’s a solid prior art search (and practice).
RT @glambert: “When is a blog a sponsored endorsement?” (via DLA Piper) http://bit.ly/peWyj
RT @CopyrightLaw: “NBC And CNBC Sued For Infringing Use Of…FONTS” http://tinyurl.com/yfob39h
RT @jayshep:Best law school advice? “Say hi to Heidi. She’s in our section.” Been married to her 13 years with 2 beautiful daughters.<
RT @TradeSecretLaw @worklawyer: Don’t lecture. Tell stories. Emotion is more persuasive than facts. < works w/ negotiation, too.
RT @matthomann: Three great questions to help you remove ego from your (and your clients’) decision making: http://bit.ly/isPkL < Excellent!
RT @CopyrightLaw: “More fair use follies — copyright infringement by court filing?” http://tinyurl.com/yh75nfc < I’m loving @copyrightlaw
RT @gfiremark: Termination rights: music to artists’ ears http://bit.ly/15O7Hq
RT @CopyrightLaw: Resale of International Textbooks to US Students Not Protected by First Sale Doctrine http://tinyurl.com/ybqo828
RT @gfiremark: Was a Contract Formed? http://bit.ly/OvsQs < K wasn’t conditioned on others’ perf. Can’t wait to see the pics.
@VBalasubramani OK… so who’s going to take this to the SCOTUS? And what’s the third case: Vernor, Cincom and…???
RT @VBalasubramani: what’s the difference between a purchase and license of software? http://bit.ly/QSMwP < Congrats! Great job.
Cool trademark search/registration site: http://www.trademarkia.com
Andy Clarke (@cowshedstudio) on being a Contract Killer: http://bit.ly/Bv4pP <Good article by the kind of person I want as a contract client.
RT @highrockmedia Freelance contracts: Do’s And Dont’s – http://bit.ly/hiXLg (via @smashingmag) < I’m commentator #39.
SEC charges former CEO of IBSG with fraud in announcing fictitious licensing agreements: http://bit.ly/3NLp6U
RT @gtiadvisors: Gmail, AOL, Yahoo! all hit by webmail phishing scam http://bit.ly/3UN3CM < What does this say about the USERS?
RT @ITLeadersForum @alltop The Twitter decision flow chart – fun way to think about our use of Twitter…http://retwt.me/CgU4
RT @marinafeehan: Nixon Peabody Says Student Recruitment needs Overhaul. http://bit.ly/CJsHL < Translation: We don’t want to go it alone.
New post at licensinghandbook.com : FTC Required Disclosure http://bit.ly/18TPsw
RT @WieseLawFirm: What are you saying that you aren’t saying? New Blog Post up on the importance of Body Language. http://bit.ly/4gSB7k
RT @Molly_McDonough: Need a social media/copyright refresher? Take this @bobambrogi quiz http://bit.ly/EyHq
RT @DanaNewman: Guns N’ Roses sued for copyright infringement: http://bit.ly/NbvWI
Court Re-Affirms First Sale Doctrine Applies to Licensed SW – http://bit.ly/2fNwsI < Compare w/ Cincom http://bit.ly/IJKVR
Just use whatever the hell you click “yes” to the first time you load up Resident Evil V to get you started. > http://bit.ly/3WiF51 < Oh my
Stanford loses patent rights b/c a researcher signed a partner co’s visitor agreement (@ontechcontracts): http://bit.ly/vyPit
RT @gtiadvisors @kaedron: Microsoft confirmed that thousands of Hotmail accounts compromised in a phishing attack – http://bit.ly/1kpIVT
RT @fscavo: Expect to hear more of these. From @DavidLinthicum “SaaS Horror Stories Are Starting to Appear” http://bit.ly/kpFT4
RT @Francineward: Intellectual property- Should biz methods be protected by patent? What will the Supreme Ct say? http://tinyurl.com/ya84d57
RT @BrianNFletcher: Reading: Red Hat files briefing in support of stopping software patents http://sbne.ws/r/2WRe
RT @DanaNewman: Dreamworks’ “Flushed Away” sued for copyright infringement: http://bit.ly/p9dOa
New post at licensinghandbook.com : Announcing the Software Licensing Education Series on DVD http://bit.ly/7RNjZ
RT @JoeTalik: Many firms unhappy with procurement outsourcing deals http://bit.ly/2lcPP < Don’t outsource what you don’t already do well.
RT @gfiremark: Excellent Review of “most prolific scholar of copyright in history” http://bit.ly/2dGAws
Have you downloaded my free Software Licensing Risk Matrix yet? http://bit.ly/FreeRiskMatrix
RT @raesmaa: Do your lecture notes violate your prof’s copyright? Holy crap! http://bit.ly/1yyPoT < Read comment #8 for the best analysis.

FTC Required Disclosure

2009-10-06T15:53:00Z

The FTC now requires bloggers to disclose what they’ve received for free.

I was about to say nothing when I remembered that I received a copy of H. Ward Classen’s A Practical Guide to Software Licensing for Licensees and Licensors. It took me so long to read and review that Ward probably regretted even having a copy sent to me. But I got it for free nonetheless. Oh, and if you want to send me something for free… I love freebies. Just remember that I’ll now disclose that I got it for free.

But I think the FTC’s missing a real opportunity for regulation. I think people who send out free things should disclose from whom they’re attempting an endorsement or comment. I’ll even go first because, frankly, I only send things to people I know and respect and who would actually have a use for what I’m sending. This, by the way, is also a great list of folks that you should be following/reading (in alpha order):

Announcing the Software Licensing Education Series on DVD

2009-10-04T20:27:16Z

The saying goes that you don’t appreciate someone else until you’ve walked a mile in their shoes. The same can be said for appreciating process. While it is still extremely easy to create new digital works in almost any medium, converting them – especially for sale – is still challenging.

So it gives me great pleasure to announce the availability of the Software Licensing Education Series on DVD. While previously offered here as a digital download, I wanted to make these videos available to a much broader audience. Teaming with CreateSpace has given me that opportunity.

The Software Licensing Education Series is video-based software licensing training. Designed with even a novice in mind, the Series progressively moves from basic topics to those requiring more experience and background. Built around a college-courseware format (100, 200, 300, 400 and 500 levels are available), the Software Licensing Education Series provides instruction in bite size pieces for optimal learning.

Pricing for the DVD set is $750 – significantly cheaper than the cost of most software licensing-related conferences and packed with way more instructional time (551 minutes… more than 9 hours of material). The DVDs may be used in a business setting, too… and are re-usable over and over as needed.

Buy the Software Licensing Education Series now via DVD or digital download and start saving money and reducing risk today! Oh, and get a 10% discount through the month of October on the DVD using discount code: 89YYH47X

This Week on The Web 2009-10-04

2009-10-04T13:55:35Z

RT @raesmaa: Do your lecture notes violate your prof’s copyright? Holy crap! http://bit.ly/1yyPoT < Read comment #8 for the best analysis.
RT @CopyrightLaw: “Focusing In On The Value: Google Books Provides An Amazing Resource” http://bit.ly/3d8YJB < Ends do not justify the means
How to Avoid a Bad Bargain: Don’t Threaten: http://bit.ly/zPEzF
Second Life sends TM infringement notice to SL educators: http://bit.ly/4qA2XO
RT @gfiremark: New case throws cold water on constitutional challenges to statutory damages awards http://bit.ly/123lyz
RT @CopyrightLaw: “Ideas, originality, and copyright. Coldplay accused of infringement again.” http://tinyurl.com/y8krmku
RT @DanaNewman: Apple and Eminem settle copyright infringement case: http://bit.ly/22VfWw
RT @fscavo: “Safe to say that the stimulus bill has been a failure” http://bit.ly/Y0TMY
RT @vpynchon @cbsalary: First Court Order Served Via Twitter http://bit.ly/LQYRc
RT @richards1000 @copycense Sweet: Complete collection of all USTR Special 301 Reports from 1989-2009 http://bit.ly/4xOXbX
RT @CopyrightLaw: “Court rules (again) that Vernor can sell Autodesk software” http://tinyurl.com/ydm65tk
RT’ing original thought w/o attribution is a copyright violation. Grrrrr.
National Archives may have leaked data on 70M vets. But don’t worry, the contractors signed a privacy policy. http://bit.ly/13Y7o8 Oops
Amazon clarifies their Kindle book deletion policy: http://bit.ly/ESmwq
RT @DanaNewman: Copyright Alliance asks Obama to support creators’ rights: http://bit.ly/18GR4T
RT @nikiblack: “Is Twitter Grounds for Trademark Infringement?” | Corporate Legal … http://bit.ly/3ubzCM (via feedly)
@kevino80 Actually, the BSA really can’t audit anyone. People only believe they can.
RT @DeistPatriot: “Let us never negotiate out of fear. But let us never fear to negotiate.” – J.F.K. #tcot
RT @mgmtmatters: The single most important thing to figure out during a negotiation – the other party’s position <Wrong. Know YOUR position.
“I just stole a baby’s intellectual property.” – Modern Family <– Awesome.
RT @vpynchon: Greatest predictor of long lifespan is being appointed to US Supreme court < Hehehehe. Awesome.
RT @raesmaa: Nice blog on negotiations but seen that win-win is worth zero when a lawyer compensated for avoiding risks http://bit.ly/phaF1
RT @maryadamsICA: New blog post: What’s the Right Definition of Intellectual Property? http://bit.ly/QKX5r
RT @raesmaa: 1990s question for IT vendors – what’s your sales model? 2010s IT – what’s your scales model? (via @monkchips)
RT @BrettTrout: Microsoft gets $388M patent infringement judgment tossed out http://is.gd/3OUWc
RT @drjimanderson: He Who Works the Hardest Wins the Negotiation: http://EzineArticles.com/?i…
New post at licensinghandbook.com : Response to 50 Tips http://bit.ly/pdBsc
@DanaNewman I love Track Changes (one of only 10 key Word features that should exist). 24# paper? Please. I’m happy if it’s signed.
RT @smallfirm Berge’s 2nd Principle of Practicing Law, “Sue solvent defendants.”
50 Tips for Writing a Contract http://bit.ly/MON8g (HT to @dananewman for the link) < But only abt 30 of the tips are actually good ideas
RT @DanaNewman: Judge tosses out remaining claims against Disney in long-running Pooh copyright case: http://bit.ly/ZmtlV
RT @GregBufithis: RT @JanusPatents: Patent BlackBerry Battle: RIM/NTP Patent Case Takes New Turn http://bit.ly/7lztW < NTP not satf w/ $612M
RT @TradeSecretLaw: Intangible assets make up 75% or more of your company’s value. Can you identify your intangible assets?
RT @CopyrightLaw: “Corporate Reorg Caused Breach of Non-Transfer Provision of License” http://bit.ly/IJKVR < I want to see the full license.
RT @CopyrightLaw: “I wish law professors realized that’s what lawyers should always do.” http://tinyurl.com/ydf34o4
Apple Introduces New Educational Software Licensing Program for Institutions: http://bit.ly/TgbuY (via MacRumors.com)
RT @GregBufithis: RT @dnball Licenses to use intellectual property are not transferable unless that right is in writing http://bit.ly/UTMPe
RT @gtiadvisors: Mega-Breaches Employed Familiar, Preventable Attacks http://bit.ly/W3bHP < Which is why I won’t remove cont’l liability.

Response to 50 Tips

2009-09-30T01:19:42Z

James Martin, an attorney in St. Petersburg, Florida has an article on his website regarding 50 tips for writing contracts that stay out of court. Most of the suggestions are good… a few are a little dated. This is my response to the dated things on his list:

3. Ask your client for a similar contract. Huh? If your client has a similar contract, they probably don’t really need you. Now, I’m not advocating reinvention of the wheel. If there’s a pre-existing solution to the problem, by all means, use it. But I’m guessing that someone’s coming to you to draft the agreement because you have the skills. More importantly, however, is that their template/sample probably contains a LOT of issues. So it’s usually 110% easier to start from scratch (or from your form) and customize it to your client’s specific needs.

4. Check the form books and treatises for a contract form. and 5. Buy forms on disk or CD-ROM. I don’t know who first created form books, but they’re not as good as one might think… and they’re not necessarily battle tested, either. You’d be better off getting a template from someone else you know if you don’t know where to start. There are exceptions, of course, but still – be careful (see the second part of my advice for #3 above).

6. Don’t let your client sign a letter of intent without this wording. Actually, my advice is to NEVER sign a letter of intent, regardless of the wording. As I’ve said before, a Letter of Intent is usually just a poorly written contract. Don’t get caught up in that mess.

9. Identify the parties by nicknames. This isn’t a hard-and-fast rule. Use nicknames only if it actually makes things easier to draft AND read. Be careful about using descriptive terms as nicknames (customer, vendor, consultant, etc) because other forms of that word could appear in the agreement. Use the “Find” feature of your word processor to discover if this is true.

12. Include recitals to provide background. I know a lot of people love these. But I hate them. I hate reading them and I hate writing them. On the other hand, for complex deals where the agreement could apply to many different things and you want to be clear on what the contract is really covering, this is the place. But for a standard software agreement, the place to list the products is in a product schedule… that way you can use the same license and only add additional product schedules w/o having to amend the agreement itself to modify some “Now therefore, the parties agree to license Word Processing application.” type of language.

17. Title it “Contract.” Actually, the better advice is to simply make sure that it doesn’t say “proposal” or some other transient contract type (like “letter”). Granted, I like document titles “Software Licensing Agreement” or “Amendment to Master Services Agreement”. But putting “Contract” in bold at the top of the first page is silly and WAY outdated.

24. Write number as both words and numerals: ten (10). I agree with Ken Adams on this one. Use the standard rules for numbers: words for zero through ten and numerals for 11 on up.

25. When you write “including” consider adding “but not limited to.” Not worth adding. Ever.

26. Don’t rely on rules of grammar. WHAT!?!?! OK. Look. Use plain English wherever possible. Write clearly. Using superior grammatical skills. If you don’t have such skills, don’t draft contracts.

29. Be consistent in grammar and punctuation. Well, at least Mr. Martin shows consistency in his inconsistency regarding grammar.

30. Consider including choice of law, venue selection, and attorneys fee clauses. Consider? Absolutely include choice of law and attorney’s fee clauses (though in some cases attorney’s fees won’t ever be granted… but it doesn’t hurt to ask). On the other hand, you’ll almost NEVER get venue if the other side understands it well enough to ask for a different location. But if you’re both in the same location, it never hurts to add it in to make sure you won’t be dragged out of state.

32. Define a word by capitalizing it and putting it in quotes. and 33. Define words when first used. No and No. Define words in a definitions section up front. Unless you only have an average of one defined term per section. Then you can define “in line”. Otherwise it just gets too ornery to try to make sure you define the term the FIRST time you use it. This is especially true when definitions end up getting used in the definition of other defined terms.

34. Explain technical terms and concepts. If you’re using terms that laypeople can understand, the only technical terms that should appear should be in a statement of work or other descriptive document regarding the work. As such, it should be written so as to be understandable by the people that have to abide by the contract. Judges and lawyers can find technical people to explain technical terms. The only time you should explain technical terms is if there’s a reasonable disagreement in the technically-educated community as to the usage of the term.

35. All contracts should come with a cover letter. Not necessary. If your contract is so difficult as to not be able to understand how to sign it, you’ve got a problem. The best thing I’ve seen so far? “Sign Here” tape flags that you put on the side of the document they’re supposed to sign for each signature line. Then paperclip your business card to the front with a post-it note attached thanking them for their help and asking them to sign and return one of the two originals.

38. Use your word processor’s spelling and grammar checker. Yes, but don’t rely on it. Two, to, too, toe. Their, there, they’re. Through, thorough. Notice anything? They are all real words and spelled correctly. Spell checker isn’t going to flag any of these. Grammar checker is no better: “A parakeet is not a bluebird.” is grammatically correct. But if you intended to say that a parakeet isn’t blue, the prior sentence is not correct but won’t be flagged.

42. Save the drafts as multiple files on your computer. Yes, but not how it was recommended. Unfortunately, using periods in your filename is still problematic for some operating systems. Weird abbreviations for drafts, comparisons, etc are also hard to decipher. Instead, try this: “filename vX date initials.doc”. So if you have a file called MasterService and it’s the 4th iteration being saved on September 29, 2009 by Jeffrey I. Gordon, the filename would be: “MasterService v4 092909jig.doc” Why do I do it this way? Well: a) it keeps the files in draft order in virtually all file systems (Windows, Mac, Linux); b) it notes which version it is (saves on confusion about which document is the latest); c) notes the date it was created; d) notes who created the draft. Sometimes I’ll substitute my company’s TLA instead of my name… but usually, I like my initials better to let me know that I was the author of that version of the document. When I get the last version that becomes the final, I change my initials to FINAL – so the name would now be: “MasterService v10 101509FINAL.doc”. This lets me know that v10 was the final and which version was signed.

44. Print the contract on 24 pound bond paper instead of 20 pound copier paper. Not worth the cost of paper. Especially if you want the other side to sign first – ask them to print two originals, sign both and send to you… you can’t control the paper it’s printed on. Besides, if you’re using a contract management system, you’re going to scan and forever more look only at the digital version, so the paper is irrelevant and not worth the added expense.

47. Initial every page of the contract. Wholly unnecessary unless you don’t trust the other side and you’re signing first. But as I’ve said before, if you don’t trust the other side, you shouldn’t be doing the deal in the first place.

48. Identify the parties and witnesses who sign by providing blank lines below their signature lines for their printed names and addresses. and 50. Add a notary clause that complies with the notary law. Witnesses and notaries aren’t necessary unless required by law for the specific type of contract you’re closing (usually for real property, but I’m not sure it’s required for any other type… anyone know for sure?). Many businesses have a notary on staff, but unless the document is required to be signed “under seal”, this also is usually not a requirement and is an added expense to some (and added time/effort for everyone).

This Week on The Web 2009-09-28

2009-09-28T11:55:26Z

RT @CopyrightLaw: “Music Industry Copies Language Of Copyright Reformers In Pushing For Three Strikes” http://tinyurl.com/ybbqfs4
RT @CopyrightLaw: EFF: “You Bought It, You Own It: MDY v. Blizzard Appealed” http://tinyurl.com/ye4tcu6
RT @gfiremark: It’s official: Victoria Espinel nominated as ‘IP Czar’ http://bit.ly/2yIgv
@fscavo they’d better understand 97-2 if they want me to bend for a revrec issue.
@rwang0 Make them show you the section in AICPA SOP 97-2 which stops them from doing what you want them to do.
RT @rwang0: Finding it pred that software vendor sales reps keep using rev rec as an excuse when pushed for discounts on 1yr maint contracts
RT @libertyluver: Justice Ginsberg in the hospital…a speedy recovery to a one of a kind woman!!!! http://ow.ly/qZLh
RT @kevinokeefe: My Name Is Kate and I Am a Listener; listening is key to use of the net (@accesstojustice) http://bit.ly/k4ART
RT @CopyrightLaw: “Beyond Kicking People Offline, France Raises Fines For Copyright Infringement To $440,000” http://tinyurl.com/l9foj7
What a well-placed $20 gets you (via @kottke): http://bit.ly/p8M5w
RT @libertyluver: And someone said Copyright Law didn’t matter? How about sticking your foot in your mouth again? http://bit.ly/1OrWtW
RT @CloudAve: DMCA Take Downs, Copyright, Fair Use http://bit.ly/wpA7f
RT @vpynchon: downturn=commercial wild west: READ THE CONTRACT … DO NOT SIGN if it contradicts reps made by sales
Seth’s new business isn’t a hit.. it’s extortion. (@TEDchris) RE: http://bit.ly/2ljDEW
New blog post on licensinghandbook.com: Insurance Basics http://bit.ly/uadLy
Do you only worry about the dollar limits in your contracts’ insurance sections? Think again. Full story coming in 20 minutes.
Not that Apple actually needed anyone’s permission: http://bit.ly/3×2fXO
Facebook gives developers access to users’ inbox messages!!! http://bit.ly/3r67OL Oh boy.
RT @stephenrwalli: blogged thoughts on the open source business “tools” and dual licensing: http://tinyurl.com/nz6uzx
@nipclaw Hmmm… dunno’ that that’s the real problem. I’ve met VERY few lawyers who’ve drafted a contract from scratch.
@nipclaw Copyright on forms might not apply in the US. Depends on a LOT of variables (See http://bit.ly/TAL4f as well).
RT @CopyrightLaw: “Scribd fires back, denies violating copyright” http://tinyurl.com/l7bqux < Gonna’ be quick if Scribd’s being truthful
RT @richards1000 @jaredcorreia @AbacusLaw History: US District Court Judge issues first digitally signed judicial order http://bit.ly/18WlaX
RT @tomsearcy: So-called “experts” are … even worse when they’re on your buyer’s team: http://bit.ly/2YF4CQ
RT @gtiadvisors: RT @DougCornelius: [new blog post] Intellectual Property and Social Media http://bit.ly/GBn4S
RT @blawgreview: Blawg Review Sherpa, “woman lawyer”, @vpynchon http://www.forbes.com/forbe… writer http://tinyurl.com/m4ewy6
RT @SusanEJacobsen: A litmus test before hiring a social media “expert” http://bit.ly/1BrE4v < Could be used with any kind of consulting
RT @adamsdrafting Blog Update: Who Gets to Draft Contracts? http://bit.ly/pNdLY < Interesting question… would love input.
RT @gfiremark: And that makes three (governments): The United States opposes the Google Books Settlement http://bit.ly/vDjtS
RT @AdamsDrafting: Easier than ever to be a free rider rather than develop content.
Too cool… just got quoted in the Washington Post on severance negotiation (I can only find the article via Omaha): http://bit.ly/3aOqzb
RT @gfiremark: The Scholarly Kitchen: ‘$80,000 per Song, and Perceptions of Copyright’ http://bit.ly/Ju3RO < Excellent post!
RT @TradeSecretLaw: Ten Fatal Mistakes that Business Owners Make – No. 10: Failure to Protect Intangible Assets http://tinyurl.com/pmqcht
NC law allows minors to back out of contracts unless approved by the Superior Court. The NCAA just figured this out: http://bit.ly/le6rl
Some rumors should rest untested (via Lowering the Bar): http://bit.ly/MHgEr

Insurance Basics

2009-09-23T13:54:46Z

Over the span of my career, I’ve seen thousands of insurance sections in various contracts. At the beginning (and at certain employers), I would have to run this section by the insurance people in the event of any changes to our template language. But as time went on (and with a different employer), we really only paid attention to the need for insurance certificates and the actual amount of coverage listed. Then one day, I found myself in charge and needed to set the policy for how we were going to handle this oft-ignored/misunderstood area of the contract. So I brought in the insurance folks to talk with me about this interesting topic. [Note: What I'm about to tell you is what I've learned as a result of countless deals and several discussions with dozens of insurance agents. But if your insurance folks advise you differently, just remember where your bread is buttered. Hint: it's not by me.]

Insurance Types

There are five basic types or categories of insurance policies: Commercial General Liability, Professional Liability (errors and omissions type), Excess or Umbrella Liability, Workers’ Compensation, and specific liability policies for particular types of work (auto, boating, construction, etc). Your contract should at least list the first four and optionally include reference to any other policies necessary based on the work you (or your vendor) are performing. There are, of course, some caveats.

Not all professional services will qualify for Professional Liability policies. It’s conceivable that you (or your vendor) will not be able to provide this type of insurance because of the nature of the work completed. However, many insurance companies will interview the insured organization and “create” a Professional Liability policy for that service – the key is to simply ask.
Excess or Umbrella Liability policies can’t exist without a primary Commercial General Liability policy on which to hang (hence the term “excess”).
Workers’ Compensation is MANDATORY. In fact, in most contracts, you’ll see this called out as statutory Workers’ Compensation. In other words, if state law requires it, the insured must have it. If the insured is a sole-proprietorship (ie: they are their only employee), this policy probably won’t apply. Again, however, it’s based on the state’s law in which the work is being performed.
Specific Liability policies aren’t always easy to determine up front. Who today can guess that you’ll need “boater’s insurance” five years from now? If you don’t list these policies in the master agreement, simply remember to add them to a particular Statement of Work when needed.

Insurance Limits

Typically, when talking about Insurance Limits, we’re really talking about the maximum dollar value of each policy. Some organizations love to go for broke on this – asking for $10M minimum aggregate and $5M per occurrence, etcetera. Lets break down the distinction and then talk about dollars.

“Minimum aggregate” refers to the total amount of money recoverable under the specific policy regardless of the number of claims for the entire life of that policy. If a $1M aggregate policy is claimed upon by 1000 people equally (over the span of the policy’s life), the most each person would get is $1000. ($1,000,000 / 1000 = $1000). But things don’t usually work out that way. Rather, these same 1000 people might claim at different times during the life of the policy. If the first of those thousand people recovers $900,000 from the $1M aggregate, there will only be $100,000 left to satisfy the other 999 future claims.
“Per occurrence” then is a limit on the per-claim reimbursement/coverage. The per occurrence limit is usually 1/2 the value of the minimum aggregate. So if you have a $1M aggregate policy, you will then typically see a per occurrence limit of $500,000. This partially helps with the problem from the end of the last section, where the first claimant receives an abundance of the value of the policy, leaving little remaining value to any other aggrieved party.
Excess or Umbrella Liability policies usually only list a “not less than” amount which is almost always 2x the minimum aggregate of the Commercial General policy. For our example here, if the CG had a $1M minimum aggregate, the Excess or Umbrella limit would be not less than $2M.
Statutory Workers’ Compensation almost never lists an actual dollar limit. Again, because it’s based on different state laws (which could change like the tides), most contracts simply state that the insured will meet the requirements of the law, whatever they happen to be at the time.

Dollar limits on insurance policies can get really interesting in a hurry, partially because of the nature of the work that many professional services organizations perform and partially because of the nature of insurance policies in general. In most cases, I ask for insurance dollar limits that are far and above what I would ever expect the value of the work performed to be. This freaks out my vendors – they worry that they won’t be able to get a $10M policy (or, more accurately, won’t be able to afford it). But I have to remember something that they would rather I didn’t – that their single insurance policy is covering the work that they do for EVERYONE.

That’s right, the nasty little insurance secret that no one really wants to discuss is that almost 100% of the time, the policy that covers your work is also covering 100+ (or 1000+) other jobs.

But wait, you say, I am named as an additional insured. That bumps me to the head of the line. Not so fast.

Insurance Certificates and Additional Insureds

In almost all cases, the customer is able to get the insured to provide them an insurance certificate directly from the insurance company as proof of the existence of the policy. And in many cases, the customer (as well as its officers, employees and agents) can also be added as additional insureds to the Commercial General Liability policy only (even if you want to be an additional insured on the other policies, most insurance companies won’t allow it). The customer then asks to have the insurance certificate even state that the customer is a named additional insured entity. What you don’t see, however, is all of the other additional insureds.

What you’re really looking for, then, is to find a way to make sure that the policy limits are going to cover the work that the vendor is performing for you – and making sure that you’re going to be able to fully recover that amount in the event a claim is properly brought. The solution? Ask the vendor to get a specific policy just for you – on a “primary and noncontributing basis” and including a waiver of subrogation in favor of you. The vendor might still balk at this – you’re asking for an individual insurance policy. But you can now decrease the policy limits to be more manageable because now you know that this policy is just for you. So the overall cost to provide insurance to you for the work performed might actually be less than if you required the vendor to increase the policy limits to extraordinary heights.

Oh, and don’t forget that you want the certificate of insurance to indicate that the Excess or Umbrella Liability policy is a “following form policy”. This means that if the excess or umbrella policy has terms or conditions that conflict with the Commercial General policy, the CG policy terms will control. But there is some controversy given current insurance practices which may make this difficult.

Insurers

Many customers also want to be certain that the insurance company providing the policy is reputable. There are different ratings institutions, but I prefer A.M. Best with a rating of no less than A-, Class X. The A- means that they’re still in the Excellent rating category and the “Class X” is an indicator of their financial health (X is actually a Roman numeral) with an adjusted policyholder surplus of $500-750M. This is to ensure that the money actually exists to cover the upper limits of any potential claim.

Policy Changes

Relatively speaking, insurance is easy to obtain. It’s not always cheap, though, so there have been times where insureds have made financial decisions to decrease policy limits or change coverage types as a cost-savings method. If you’re a customer, you want to know about this as it’s happening (and not at the start of the next year when the next insurance certificate arrives with lowered limits, leaving you to wonder when the change actually happened). So always remember to include language in your insurance section that requires the insured party to notify the other of any changes to the policy within 30 days of any adverse change (you really don’t care too much if limits are increased).

This Week on The Web 2009-09-20

2009-09-20T13:04:14Z

Too cool… just got quoted in the Washington Post on severance negotiation (I can only find the article via Omaha): http://bit.ly/3aOqzb
RT @gfiremark: The Scholarly Kitchen: ‘$80,000 per Song, and Perceptions of Copyright’ http://bit.ly/Ju3RO < Excellent post!
RT @TradeSecretLaw: Ten Fatal Mistakes that Business Owners Make – No. 10: Failure to Protect Intangible Assets http://tinyurl.com/pmqcht
RT @raesmaa: Every person … of restless mind writes a book. From Predictions for 1993 (1893). http://bit.ly/HA8UY < It’s the internet.
NC law allows minors to back out of contracts unless approved by the Superior Court. The NCAA just figured this out: http://bit.ly/le6rl
Some rumors should rest untested (via Lowering the Bar): http://bit.ly/MHgEr
RT @blawgreview: Negotiation 101: Gender War Or Gender Peace And Prosperity? http://tinyurl.com/m4ewy6 (it’s @vpynchon, no less!)
RT @DanaNewman: Fergie named in copyright infringement suit over “Voodoo Doll:” http://bit.ly/8JLEY
RT @bethanyriskin @stacyrea: Leader Test: When your team members “fail,” do you wag your finger or extend a hand?
New blog post on licensinghandbook.com: Contracting as a Specialty: http://bit.ly/iCFYQ
RT @richards1000: “Professor Posts ‘Illegal Copy’ of Guide To Oregon Public Record Laws” http://tinyurl.com/kq35dc (via @CopyrightLaw)
RT @BrettTrout: IBM’s new strategy: Open Innovation. http://is.gd/3o3DV < About damn time.
RT @gtiadvisors @lawyerist: Lawyers do Love Arguing http://bit.ly/1uzoJ5 < Remember, though, that arguing isn’t negotiating!
Open Source Business Models: http://bit.ly/EVvXC (by @stephenrwalli)
Listening tips from a Hostage Negotiator: http://bit.ly/WUEMn < These are great… esp #2.
New blog post: Business Continuity http://bit.ly/1dwMvn
DOJ may revise eDiscovery procedures after 9th Cir ruling: http://bit.ly/ZNlet
Apple pushes to change subscription accounting rules: http://bit.ly/Mjf4z < RevRec lesson of the day
RT @kottkedotorg: Protecting yourself from your own irrationality http://bit.ly/12nj3M < Excellent negotiating advice!
RT @AdamsDrafting: Blog Update: Lawyer and Contract Manager: Compare and Contrast http://bit.ly/KwMKo
RT @uMCLE @SCartierLiebel @GabrielCheong: Agreements on Sex in Prenups http://bit.ly/4xnvsu < Love this lesson on contractual severability.
RT @bobambrogi: LawSites blog: Free Site Enables Document Assembly http://bit.ly/vda1A (@jasonanderman)
RT @bcuban @Smartalyx @Lotay: A blogger who gets a product (before/after a post) doesn’t disclose has ethical probs. Do you agree? <Agree
RT @uMCLE @steigerlaw 16 Major Studios Sue ‘Ellen DeGeneres Show’ for 1,000+ copyright violations http://bit.ly/cSI6D < hehahahahahah
Great negotiation advice: http://bit.ly/1dY7du

Contracting as a Specialty

2009-09-16T16:38:47Z

I have written before on how a contracts professional can justify their position within an organization. One of the hardest groups to convert to your way of thinking, however, can be lawyers. It’s interesting when you can get the lawyers to admit this because they are well aware of the value of specialization and the nature of what is taught in law school. For those of you not graced by the opportunity to spend at least three years of your life burrowing into the method of how to “think like a lawyer”, please allow me to explain.

Law school creates generalists. Your curriculum usually spends 1.5 years on the 10 basic classes: Criminal Law/Procedure, Civil Law/Procedure, Constitutional Law (usually long enough to require 2 separate courses), Torts, Evidence, Legal Writing and Contracts. The rest of that second year and part of the third is usually focused on electives: tax, business, alternative dispute resolution, intellectual property, etc. The last part of the third year (distributed in part of the second and third years, actually) is almost always some sort of practicum or clinic experience along with some trial advocacy skills and legal ethics.

So at the end of this endurance test, newly minted lawyers have had exactly ONE class on most of the various subject matters that they’ll encounter in practice. This is pretty frightening to some if you consider that some new lawyers immediately hang their own shingle and go into practice for themselves. Contrary to the educational system of the past, then, these lawyers now have to learn on the job with live clients.

This is true of contracting. If they took an elective on contract drafting, then fine, they had two classes. But still – a sum total of 1 academic year of discussion on contract theory and drafting is not a lot when you consider the vast nature of the space. Software licensing, hardware purchase agreements and other tech-related contracts are but one type of contract. Services agreements, nondisclosure agreements, regulatory-related agreements and others add to the mix (and we haven’t even talked about things like Statements of Work or other more business-y agreements).

Add to this the fact that contracting doesn’t happen in a vacuum. Contract negotiations are the method by which two or more parties come together to agree on the needed and acceptable language. Negotiation is but one facet of alternative dispute resolution – and again, unless taken as an elective, hasn’t necessarily been formally taught to a law student.

All this is to say that it makes sense that contract professionals exist in this world as a specialty service. In fact, some contract professionals even only specialize in one type of contractual agreement. Lawyers should therefore: a) not assume that their law degree grants them the knowledge to automatically operate in this space without additional training; and b) remember that specialization is a hallmark of the law business – so they shouldn’t be afraid of seeking assistance from contracting specialists when they’re approached for this type of service.

Lawyers in the crowd may be booing me at this point, but wait! All is not lost. There is VALUE in using specialists to do this work for you:

First, is that top-tier contract professionals aren’t cheap. We don’t bill at the rate of a DC Partner, but we’re not giving work away, either.
Second, contract professionals are efficient. It takes me, on average, about an hour to read and redline two-to-four pages of dense material.
Third, contract professionals have their eye on the prize. We’ve seen enough deals (because this is what we do) to know what’s really important and what can be passed over. We know when to fight and when to concede.

Combined together, this means that your average specialist takes less time to produce more quality work – and what’s billed is still “acceptable” to both sides. Lawyers and law firms alike should remember that they don’t need to go it alone (regardless of whether they’re in-house or out in the world). Contracts professionals aren’t trying to be lawyers (even if a contract professional or two happens to be one) – they just want to be contracting specialists… and they can help a lawyer spend their time more efficiently and effectively, too.

Business Continuity

2009-09-16T02:19:46Z

A lot of conversations have been going on recently regarding source code escrow and business continuity: here, here and here.

Wow. Regardless of whether you’re talking about on-premise applications or SaaS “hosted” apps, business continuity is a pretty important issue. Many organizational leaders are extremely worried about making sure that their infrastructure is stable enough to allow them to sleep well at night. So they sink a lot of cash into various potential solutions in hopes that they’ll create a safety net. Right now, for most customers and vendors, this safety net is built out of four potential components (some solutions aren’t conducive to all options):

source code escrow (vendor out of business)
insurance (vendor causes damage)
warranties (solution doesn’t work as advertised)
IP indemnification (solution infringes on rights of others)

Like any net, though, it has a lot of holes – gaps in the netting where stuff can slip through. Even if you try to cinch the net tighter, it’s not a solid material – there are ALWAYS going to be gaps. This is a hard lesson to learn, especially in the game of risk management and mitigation. You’re not going to protect it all. [It's an imperfect analogy, but look at the Secret Service detail for the President of the US - he doesn't walk around all day completely enclosed in bullet-proof material. Rather, he's protected by agents all around. Once and awhile, something slips through, even after extensive diligence and effort.] At the end of the day, therefore, you protect against what you can with the understanding that the only way to obtain 100% protection is to restrict operations by 100% as well.

The goal, therefore, is to find a way to mitigate the biggest risks, not just the low-hanging fruit and those that are most obvious – but those that can cause the most damage. Which brings us back to losing access to software used to run a business. This could be your desktop operating systems… it could be your word processing applications… it could be your CRM (customer/relationship management) application. The key is to determine which applications are mission critical and then figuring out strategies to make sure that you have options available in the event you lose access.

This does not mean you need source code escrow for every application. Microsoft Word, as pervasive as it is, isn’t the only word processing application available in the world. It’s also not using a file format that is wholly unreadable by any other word processing application. So if Microsoft Word becomes suddenly unavailable tomorrow, even if it was a hosted application (which it currently is not), having spent money on source code escrow will have been wasted. You could probably more cheaply (and with greater efficiency) simply buy a new word processing application. And guess what? This is true for almost ALL of the applications that your business uses! As Apple has been saying for their iPhones, “there’s an app for that.” In fact, there are usually a dozen. What you move to might not be your favorite, but it will get the job done in a cost effective manner.

So where did you need escrow? In the past, it was for customized applications or those that required substantial and pervasive integration and implementation – something so ingrained in your environment that its failure would immediately and irreparably cripple your business. Many CRM tools used to be of this nature. They were so customized… so specialized… so deeply modified for your particular use that it wouldn’t be as simple as just grabbing a new one off the shelf and porting the data over. But that’s not really how it is these days. Data is no longer held in proprietary databases, it’s held in more generically available database architectures (like Oracle or SQLServer). Competitors now are even building their apps using similar data structures to encourage customer poaching. You can thus port your data efficiently and quickly if necessary. Thus escrow has become an almost non-starter. Eventually, you’ll have to move to a new app regardless – but with an on-premise solution, you can keep using the software until you migrate. Source code isn’t going to get your data moved to a new application any quicker.

For hosted apps, however, the added risk is that you no longer have control of your data. Even a daily backup doesn’t get you the application. Source code escrow in this scenario was hopefully going to give you access to the code to bring up at your own site if the hosted vendor went away. But wait! It’s not OBJECT code escrow, it’s SOURCE code escrow. Additionally, you’re not getting the support applications, either. We need another option. A way to provide a SaaS customer continuity in software use.

It’s brainstorming time. I put out my suggestion in the comments of Frank Scavo’s post. Now it’s your turn. Speak loudly – get creative – no idea is too outlandish. The comment area awaits your input!

This Week on The Web 2009-09-13 (my birthday edition)

2009-09-13T11:23:18Z

It happens to be my birthday weekend and between eating some great food, playing Guitar Hero with my wife and hanging with the family, these are the things that happened around the web this week – maybe you already read about them, maybe you need to again – there were some REALLY great discussions going on. Come join the party on twitter (follow me here and you’ll join the conversation live.)

RT @rwang0 @dealarchitect: Don’t cry for me Germany. SAP had plenty of warnings. http://tinyurl.com/mclvbm < I can’t wait to see who’s next
RT @richards1000: Tuunanen et al. on Automated Software License Analysis http://bit.ly/svjQR < Cool but irrelevant. FOSS license are nonneg.
RT @rwang0: reading the new twitter terms of service. like the fact that you and only you own your content. < At least for now.
RT @jimcalloway @ernieattorney Important safety tip for ‘would-be lawyer bloggers’: if you lack common sense don’t blog http://bit.ly/2fFcBH
New blog post: Content, Value and Commoditization http://bit.ly/27HVx
RT @btannebaum: Lawyers, do you care about transparency on twitter? http://mylawlicense.blogspo…
Contract negotiation according to the Marx Brothers: http://bit.ly/12U7pY
US Registrar of Copyrights opposes Google book deal: http://bit.ly/KhP83 … so do I. Unwarranted monopoly.
… and then there was a whole discussion on what constitutes being an expert at something, sparked by one lawyer’s assertion that it takes 6 months’ of research and then a good SEO strategy to get yourself to the top of the Google rankings. I, and others, disagreed. (RT @nikiblack @Adrianos: “How To Become An “Expert” In Your Niche In 6 Months” http://bit.ly/pIj2Q < I really do NOT like this!)
New blog post: On Acceptance Testing… http://bit.ly/s0zsV
@JasonAnderman The author misses part of the value of the lawyer – understanding that a form isn’t 1sizefitsall. Available /= viable.
@ferrusi @PeterKretzman When discussing vendors, not having them in the room usually leads to more openness. It can also reveal biases.
@PeterKretzman @mckenziesa: RE: Find a way to get the salesmen out of our vendor discussions! < Um, Ask them to leave?
RT @glambert: Blogging Lawyer Charged with Confidentiality Violations – http://bit.ly/mLcTj (Public Defender tells a little too much)
RT @rwang0 Cloud computing model – IDC numbers show s that its … 1/2 the cost < How does that translate to customer fees?
RT @PeterKretzman @testobsessed Source code, like invty, is a liability, not an asset. (PK: indeed. It’s why I laugh at source code escrow)
RT @vpynchon @tamerabennett: Disney, Pixar Sued by Luxo Lamp Co: http://bit.ly/MO4X7 < Shouldn’t matter. Pixar’s not selling lamps.
RT @fscavo: @negot8or thinks #saas providers should set up living trusts (my word) for their customers. Read comments: http://is.gd/34L65
Kate Gonzalez’s Tom Ten Force Majeure Imposters (via @superbuyer): http://bit.ly/Ol4Wy
Confessions of a Car Salesman: meeting, greeting and dealing: http://bit.ly/3nihk (via edmunds.com)
Antitrust lawyer slams Google book pact: http://bit.ly/83Hqp (via All Things Digital)
RT @LeighMonette: RT @PrivacyLaw: “’Anonymized’ data really isn’t—and here’s why not” http://tinyurl.com/ksxz8t
RT @fscavo: Just blogged: SaaS contingency plans need more than software escrow http://bit.ly/r2cJn < Escrow is wasted money IMHO.
RT @jimcalloway: Blogged about lawyers taking their laptops across the U.S. borders. http://tinyurl.com/n4bfms
RT @BrettTrout “World Patent” good for M$, bad for most everyone else. http://bit.ly/o0rbZ
Jeremy Telman, contracts prof @ my almamater, on why execution before performance is a good idea: http://bit.ly/1iJjY7
RT @vpynchon: http://twurl.nl/tiuvp7 the negotiation analysis of the lessons of the Cove (which halted the killing of dolphins for one day)
RT @bobambrogi: LawSites blog: Plaxo’s New Terms of Service http://bit.ly/1BNRy
RT @bobambrogi @paulzink: You and your attorney colleagues (esp. those in copyright law) may get a chuckle from this: http://bit.ly/jJd6G
… and then we had a long discussion on the tweeting of the play-by-play via twitter of a NFL game (the NFL likes to exert some extreme control over their content). Some folks thought that twitter was a game-changing technology. I argued that it was control-changing…. that they should tweet every game in their own words: @FlashFusion @julito77 @gtiadvisors It’s only a copyright issue if you tweet the actual broadcast wording/play-by-play. Make up your own.
RT @doctorow: Another reason you can’t outsource your kids’ online safety to spyware companies: http://tinyurl.com/n934fh < Read the EULAs!!
RT @gtiadvisors @GregBufithis @BrettTrout Proposed U.S. patent law reforms would stifle innovation and injure entrep’s http://is.gd/2ZXza
RT @OmarHaRedeye: Blawg Review #228 is live http://bit.ly/11D50J/ < Thanks for the inclusion!
Sometimes is pays to see how the software sausage is made: http://bit.ly/S3b5p

Content, Value and Commoditization

2009-09-10T15:10:23Z

In the last 24 hours, there have been a slew of articles published or noted by the community-at-large on the concept of “free” content and the struggle that old business models are having trying to continue operations when things that used to be scarce (like form contracts) are now virtual commodities.

Some of these articles advocate changing the business model – such as this article that talks about offering “free” versions and then what amount to special editions – customized content that people would pay for since it appeals directly to their interests. Others, like this post by Jason Anderman (of WhichDraft fame), talk about the economics and business advantages (giving away free content potentially encourages customers to come back to you for paid gigs). But everything seems to be stemming from Chris Anderson’s latest book: Free: The Future of a Radical Price. As I’ve not yet read this book (but his other on The Long Tail was interesting, if not challenged by some economists), I can’t really comment on what Chris is suggesting.

But I can comment on the value of free, especially as it relates to contracts, software licenses and other legal forms… and it’s a cliche, but the truth is: You Get What You Pay For, especially in legal forms. But this is because it’s not about the form itself, but rather, the drafter and the advice you get when using the form.

To understand why legal documents are somewhat of an exception, it’s important to start at a foundational level (with the law) and build up towards the client. Remember first that within the United States alone, there are 51 bodies of law (each State, plus Federal), not including any of our protectorates or territories… nor considering any of the other 193 US State Department-recognized countries’ laws. Second, know that within a given type of agreement, there are literally THOUSANDS of potential combinations and permutations of clauses that can be used to obtain a particular goal – and dozens when you whittle down your agreement to only be governed by one or two bodies of law. Lastly, think about your own personal situation with respects to your needs. Now look around and ask yourself what other items in your life you use without modification of some sort. Your home, car, office… even your computer. All are customized because of the way you plan to use the tool. Sure, there might have been a framework involved, but who did the customizations?

The answer, with respects to contracts, is a contract specialist and sometimes a lawyer. They use templates as starting points to prevent the re-invention of the wheel and to make sure that all bases are covered. But they are only starting points. As I’ve said in the past, I almost never give/sell/provide my templates to other people because I’m simply afraid that they’ll take them and use them without modification – contrary to their intended use.

In fact, a few years ago, I ran a search to see how many online EULA’s were similarly modeled after Microsoft’s… and was pretty shocked to discover the sheer number that had copied the document word-for-word, including the choice of forum language (venue) for any disputes. I notified a very distressed company in Australia that they might want to change the language because as it stood, any disputes with them would have to be resolved in King County, Washington (Seattle, Microsoft’s hometown).

So remember that while you might find forms, templates and other legal documents freely available online, you probably need professional assistance to help you customize that document for the specifics of your particular situation. Don’t be fooled into thinking that one size fits all. It doesn’t. AVAILAbility doesn’t equal VIAbility. (That said, Stephen Guth gives away his license agreements – which are good starting points if you’re looking for a free document.)

On Acceptance Testing…

2009-09-10T03:10:38Z

My car needed an oil change today. It’s been about 5 months, 6,000 miles and while I know I can push it that far, it was finally time for me to get it done. I thought about doing it myself and decided that Jiffy Lube would more efficiently meet my needs. But I always feel a little weird about oil change places – they show a long list of things that they supposedly check… but unless I stand out there hovering in the bay, I don’t feel confident that they’ve actually completed the work.

Today I didn’t hover, I was reading e-mails. When they called my name to pay, they quickly read off the list of things they checked and reviewing the computer screen, I asked the guy behind the counter: “Did you check the engine coolant level?” With a slight hesitation, he replied “Yes.”

I paid, took my keys and walked out to my car. Deciding to check the coolant level, I popped the hood and looked. Sure enough, the fluid was below the line marked “Fill”. I walked back inside and told the same employee that I thought that the fluid wasn’t checked and could he come confirm. He looked a little shocked, walked out to the car and confirmed that the fluid was low. He apologized and made some sort of excuse about the shop being busy and that my question during check-out didn’t raise any red flags – that he figured I’d asked them to check it and that his employees did (apparently, he was the manager). I said it was no big deal, but that I would like it topped off.

[OK. If you haven't already figured it out, this story parallels many services-type engagements from the IT world. You pick a provider when you realize you don't want to do it yourself, you "order" a set of services... and at the end, you are presented with a completion check-list and asked to pay. What services providers don't want prior to payment is anything conceptually equivalent to an Acceptance Test. They want payment first and then resolution of any "defects" under their services warranty provisions (if any). This way, they have control of the money and can book the revenue as earned.

But don't let their desire to avoid Acceptance Testing sway you... and don't fall into the trap I did today and pay first. What happened next was predictable and I should have seen it coming.]

The manager then said, “well, we normally charge for topping off the coolant.”

Oh. Alright, I thought, whatever… just get my car finished and get me on my way. “How much does that cost?”, I asked.

“Five dollars.”

Thank god my negotiation-sense kicked back in … and I just stood there silent for a few beats too many.

“But because of the confusion, I’ll take care of it.”, he continued.

I smiled and said “Thank you.”

While he was retrieving the coolant I scanned the engine compartment and realized that the large rubber gasket between the hood and the firewall had completely come off and was just laying across the engine! Holy cow. I was really glad I popped the hood today – this piece of rubber, which probably came off during the oil change and was simply overlooked due to its matching blackness to everything else under the hood, could have gotten wound into various belts, heated and set afire or fallen down to the road and lost. It was a no-brainer fix to simply push it back onto the car’s frame – but catching it was the biggie.

The same is true for many acceptance testing issues – the no-brainer is to look for them at the right time (preferably before payment). Don’t get suckered into someone else’s process (they moved my Jeep out of the repair bay and into the parking lot (keys in it and running) as “customer service” perk. But it’s meant also to get you off the lot before you notice anything wrong (where they can attempt to reasonably say that the problem happened outside their control).

One again, learn from my mistakes.

This Week on The Web 2009-09-06

2009-09-06T13:08:41Z

The things that happened around the web this week – maybe you already read about them, maybe you need to again.

RT @LeighMonette @cyberlaw: Microsoft can still sell Word, at least until the appeal is decided – the stay was granted. http://is.gd/2StlM
New blog post: The Prisoner’s Dilemma http://bit.ly/3pXV37
It only takes 1 person who knows your purchasing system to bilk you. http://bit.ly/pBmcI Wanna’ chat about better processes? Call me.
RT @harrymccracken: Amazon gives Kindle owners their copies of 1984 and Animal Farm back: http://wp.me/pg9un-4iW
Remember the story about a music label paying artist’s education from early this summer? They didn’t. http://bit.ly/hhf1a
Because I love words: http://bit.ly/rN6v0
RT @bobambrogi: LawSites blog: New Site for Sharing Legal Documents http://bit.ly/1SXQGf < Just remember you get WHO you pay for.
RT @wallybock: RT @ericdbrown: Blog post: The Dangers of Hidden Talent – http://bit.ly/170Yk
RT @gtiadvisors @GaryHonig: The SBA has a new online federal procurement training site http://www.sba.gov/fedcontr…
RT @gtiadvisors @constructionlaw: Insurance, Guarantees and Performance–Oh my! http://su.pr/1aFG69 < Glad 2 C this is more than an IP prob
RT @blawgreview: Is there a looming trust crisis in the “social media expert” space? http://tinyurl.com/lfc9bn via @CharlesHGreen
New blog post: Brittle Contracts http://bit.ly/2Qo5hE
RT @Licensing_News: TSO3 enters into exclusive negotiations with 3M http://cli.gs/dNPJ7 < Wondering about benefits of this announcement.
RT @SusanEJacobsen:“Small talk” is just that–small & insignificant. Say something meaningful. Give folks something to think about. Be real.
Fifth of Five Fundamental Skills for Effective Negotiation (Communication): http://bit.ly/2GfAel
RT @CloudAve: Free Sometimes Comes at a Huge Cost http://bit.ly/x2f5O < Excellent!
RT @gtiadvisors: @negot8or (trusting SM) I would suggest the old fashion way – Trust, but Verify… the verify part is where we help.
DOJ announces $1.9M+ in grants for criminal IP enforcement: http://bit.ly/11MMWZ
Is breach of contract a good use of taxpayer dollars? http://bit.ly/d7kgE
One reason I don’t like press releases for deals: http://bit.ly/12rE0o
4th of Five Fundamental Skills for Effective Negotiation (Perception of Power): http://bit.ly/Fi64Z
I’m excited to announce that my wife and I are expecting in March, 2010. http://twitpic.com/g17r0
Seth Godin on “wanting”: http://bit.ly/1mvLJ8 < Apply this before negotiating to clarify your needs vs wants.
RT @LeighMonette @internetcases: Interesting email privacy case that could be relevant in cloud computing context: http://is.gd/2JxpU
Thanks to Sheryl Schelin (@theinspiredsolo) for including the LicensingHandbook Blog in this weeks’ blawg review: http://bit.ly/YULSx
RT @gtiadvisors @BurgessCT: Alliance Against IP Theft http://ow.ly/nnke – their new website is full of useful data & easy to navigate
RT @SuperBuyer: How are vendors like a Big Eighties band? Find out here: http://tinyurl.com/m3m9y2
RT @jod_writer @caseywright: Girl’s science project disproves advertiser’s claims, results in multi-million $ lawsuit http://bit.ly/14iTan
RT @jod_writer @chucknewton @BlawgTweets: Ave Maria School Of Law Prepare Student’s For Law School By Scrubbing Toilets http://bit.ly/17DcKc
RT @gtiadvisors @gaconsultants Not first time, had case 3 yrs ago, Marriot and Radisson Customer Data Breached http://bit.ly/ZP6dv
RT @fscavo: heheh RT @yourdon For software ppl, today’s Dilbert is hilarious! http://bit.ly/LSuwW
RT @iasta: Poor Communication = Poor Supplier Performance, Part V http://bit.ly/2jMoQV

The Prisoner’s Dilemma

2009-09-02T13:27:18Z

Martin Proulx recently attended Simon Bennett’s presentation on Game Theory and Contracting. Martin related with interest the games that Simon used to illustrate the need for better contracting process between parties, specifically three games: The Prisoner’s Dilemma, The Pirate’s Game and The Bidding Game. I wasn’t able to attend the event so I don’t know exactly how Simon used these game other than through Martin’s explanation, but I was intrigued by the supposition that some people treat contract negotiations as they would the Prisoner’s Dilemma.

To understand my intrigue, we need to start with an understanding of the Prisoner’s Dilemma game. This game starts with two players, both “accused” of committing a crime together. They are then separated with no means of communicating with each other. The only way to “win” the game is for both players to say that their accomplice is innocent. If one person fingers the other for the crime, the innocent one goes free and the guilty one stays in prison. If both parties accuse the other, both stay in prison.

As Martin explained Simon’s presentation, he states that the “game is interesting and demonstrates why contractual agreement has the potential to results in an optimal deal but leads most of the time to the worst possible scenario.” (italics are mine).

Woah!

[Side note: I don't know Simon or his background... nor do I know that Martin's recollection of the session accurately depicts Simon's statements. Everything that follows is merely a response to what was posted on Martin's blog.]

While I do think that some game theory applies to contract negotiations, I don’t believe the Prisoner’s Dilemma is an accurate game to ever use to show the contracting process. If you’re closing deals and it feels this way, I’m sorry to tell you but you’re doing it wrong. Time to start from scratch. If you have been doing it this way and need to start over, here’s the scoop:

Contractual agreements should NEVER lead to the worst possible scenario. In any negotiation, you must always remember the Five Fundamental Skills for Effective Negotiation: Information Gathering, Strategic Thinking, Time Management, Perception of Power and Communication. To counter any potential Dilemma scenario, you only need two of these skills: Information Gathering and Communication (and really, you only need Communication). Simply talking with your accomplice would create a better outcome. If you add Information Gathering, you’ll discover the three possible outcomes… and then can obviously choose the best one together with even less discussion.

If, for whatever reason, you haven’t gone through the Five Fundamental Skills and are thus not ready for negotiation, don’t negotiate in the face of ill-preparedness. Delay the negotiation until you have time to prepare properly. Lastly, if you’ll never be ready, remember that you can always walk away.

Brittle Contracts

2009-09-02T13:01:15Z

David Dobrin (of The Applicator fame) wrote recently on the topic of brittle applications. He defines a brittle application as “one that doesn’t work unless a lot of disparate conditions are met.” In thinking about his description of MS-Word, I was struck by the concept that many contracts I encounter are brittle as well.

To illustrate my point, think about the last contract you reviewed. Did it have a definition section? How about references to external documents (a spec list, a set of documentation, a “missing” Exhibit or Appendix)? Was it full of cross-references or have noticeable gaps (such as missing language for standard terms)? Was the contract obviously written for a different type of product or service? In all of these situations, I believe you have a brittle contract.

Contracts are “incorporated” documents. This means that all of the various sections have to work and play together to form a cohesive end-product. When you’ve identified gaps, errors or problems, these mistakes can cause cascading failures throughout the entire agreement. A poorly-defined term, for example, could ripple through the contract, causing errors in judgment regarding expectations, or could even create legal problems with regards to intellectual property. In other words, the poorly-defined term doesn’t hurt itself, it hurts the entire document.

The same is true for commonly overlooked sections on subjects such as term, termination and scope. When a lack of attention results in an incomplete picture of the relationship, the net impact can be extremely detrimental (ever had a perpetually-renewing contract for poor services that was hard to get out of because termination was only for breach, yet the services weren’t defined well enough to hold the vendor to performance standards? I have.).

You can also look at brittle contracts from another perspective, one my friend D.C. Toedt might appreciate. D.C. seems to love language portability – drafting contract sections that can be used in a plug-and-play format to craft the appropriate document (you should check out some of his work in his clause library). This type of drafting is a part of the holy grail of contracting – the complete automation of the contract creation process based on a wizard-style interface which asks questions and assembles an appropriate finished product from such a library of contract clauses.

The inherent problem with document assembly is brittleness – that you insert a clause into the agreement that has to properly “work” with all of the other sections. If the clause has a faulty cross-reference, for example, the contract breaks. On the flip-side, however, document assembly fixes one of the aforementioned brittleness issue with current contracts – having a completely appropriate document for the specific product or service being offered under the agreement.

So… how brittle are your contracts (especially your templates)?

This Week on The Web 2009-08-30

2009-08-30T13:20:08Z

The things that happened around the web this week – maybe you already read about them, maybe you need to again.

RT @ferrusi: RT @procurement: 10+2 Strategies for Managing Suppliers http://bit.ly/wIbFn #sourcinginnovation
@gtiadvisors Even better is the ToS: http://bit.ly/12Pupt <They’ll narc on you if they believe you’re attempting to commit fraud.
Lego “rejects” Spinal Tap’s request to use minifig stopmotion video: http://bit.ly/j4AnX < I think Lego is outside the lines on this one.
NC passed a recent law banning texting while driving. NC DOT started Tweeting traffic updates this week. Where’s Alanis now?
New blog post: My Lego Love is Fast Fading http://bit.ly/wncA9
Stephen Guth on whether RFI’s are Ethical: http://bit.ly/iKzP9
RT @DreamSimplicity: RT @SIIA_Software:#SIIA Announces Appointment of New VP of Comm http://bit.ly/4oCzQJ <could explain new pirate video
Madisonian on the Ninth Circuit’s decision on computer searches and the plain view doctrine. http://bit.ly/wFpic
RT @nikiblack @DougCornelius @brucecarton @complianceweek: Oops. Important: Remove “Fudge This” from Financials. http://tinyurl.com/m9t9w6
Ongoing discussion on FOSS license types: http://bit.ly/30u595 < Really good commentary from Shlomi.
RT @LeighMonette: RT @AdamsDrafting: Blog Update: When to Provide for Indemnification http://bit.ly/gno5Q
RT @russellbesq: RT @LawProf: “Second Degree Murder and Six Other Crimes Cheaper than Pirating Music” http://tinyurl.com/ns8y78
RT @russellbesq: RT @PrivacyLaw: “Alaska Data Protection Law” http://tinyurl.com/kvfudu
3rd of Five Fundamental Skills for Effective Negotiation – Time Management: http://bit.ly/q7Z2b
RT @glambert: Unpredictable Playlist Dooms Sound Recording Copyright Holders’ Infringement Claim – http://bit.ly/OcufG (Mintz Levin)
RT @nikiblack: “You didn’t learn that in law school either?” Legal Antics http://bit.ly/Ps1EF (via feedly)
New blog post: Jeff Gordon on Supply Excellence http://bit.ly/2GnCAi
2nd of Five Fundamental Skills for Effective Negotiation – Strategic Thinking: http://bit.ly/11Nyof
RT @gtiadvisors @idexperts: Feds Issue New HIPAA Data Breach Rules: http://tinyurl.com/n5sx3g < Important for your contract lang on confid.
Layaway is back… I didn’t realize for school supplies. Anyone wanna’ see if together “we” can pay some off? http://bit.ly/3fXxPK
RT @nikiblack: Great comments from @LeighMonette: “Should lawyers be wary of cloud computing and SaaS?” http://bit.ly/WbS6m < Agreed!!
RT @nikiblack: Very interesting discussion re: lawyers use of cloud computing in the comments to this post: http://bit.ly/iyYyV Join in!
RT @nikiblack: “Should lawyers be wary of cloud computing and SaaS?”: http://bit.ly/WbS6m < Note my concerns in the comments.
RT @hitchandplow: New blog entry: Google Book “Settlement” is Bad for Law, Copyright owners and Users http://bit.ly/3IFdZv
New blog post: More on Trust http://bit.ly/1D8f9Y
1st of Five Fundamental Skills for Effective Negotiation – Information Gathering: http://bit.ly/15a3Hn
. @ontechcontracts “In praise of short, simple contract clauses” : http://bit.ly/fikJn < Perfectly succinct.
Speed limit raised b/c “radar speed checks show … already “safely traveling” at that speed: http://bit.ly/um1k5 < chicken & egg problem
RT @stephenodonnell: New blog post: Vendor Consolidation http://bit.ly/1s38Br < Here, here!
RT @TheAntiGuru Playing games during negotiations can be costly… http://bit.ly/6tpK #negotiation < great story, demos all 5 Fund Skills!
RT @francois_ A Decision-Making Perspective to Negotiation: A Review of the Past and a Look into the Future http://bit.ly/ODRX6
@benpobjoy If you need help with contract negotiations… some of us out here are willing to do so.
RT @glambert: New on 3 Geeks: Are Blogging and “Thought Leadership” Compatible? – http://bit.ly/WoKFa
RT @mental_floss: Students at Occidental College can take a course in stupidity (CTSJ180) offered by the Critical Theory/Social Justice dpt.
Baby lawyer just risked $475K on Millionaire and lost it. I wouldn’t use him as my attorney – in his own words, he wasn’t risk adverse.
Fatal negotiation mistakes made by copyrighters (or any other service professional): http://bit.ly/gxgJv (from zeriously.com)
Interview w/ managing partners @ Raleigh firms: 70% don’t use ANY social networking sites. Wow.

My Lego Love is Fast Fading

2009-08-28T15:02:55Z

I’ve loved Lego since I was a little kid. I haven’t really counted, but I’m guessing I still have (in large crates in my garage) somewhere around 300+ Lego sets of varying size. There’s something about allowing your creativity to roam that really interests me. And as a company, the Lego Group has also been of keen interest from an intellectual property perspective ever since they started becoming sticklers about calling Lego blocks “Lego Bricks and Toys”. But I think they’ve crossed the line recently with a “rejection” preventing the mock-rock group Spinal Tap from including a Lego-brick-based stop-motion video on their latest DVD.

I use the word rejection in quotes in the prior sentence because I don’t think that the Lego Group had any rights on which to make their claim. Per the article, Lego Group claimed copyright over the figures themselves (known in Lego parlance as a “minifig”) whereas Spinal Tap’s IP lawyer clearly states that they weren’t intending to show the Lego Group’s logo or use the word Lego anywhere in the DVD. Copyright protects written and visual works embodied in a tangible medium of expression. So I’m trying to figure out how the Lego Group thinks that they have a copyright over the minifigs themselves. I just don’t see it. Even from a search at the US Copyright Office, what I see are a slew of Lego registrations over the various books, stories, videogames and logos. I also see one deemed a “sculpture”, which I can only assume is a large version of one of the Lego minifig. But then the copyright would only cover that sculpture itself – not necessarily every little conceivable permutation of Lego minifig made possible by the myriad tops, bottoms, heads, hair and accessories available.

But even assuming that Lego holds a copyright in the general design of a Lego minifig, would the use for this DVD not qualify as fair use? I’m not sure it would – it’s parody, but not of Lego… it’s for profit… it “takes” the entire work. OK. Fair use is out. (Which blows Spinal Tap’s attorney’s idea away, too.)

So if the minifig IS registered, yet is distributed 4 billion times (per their company profile)… without any kind of licensing document attached to it… by a company that zealously protects its intellectual property rights… leads me to believe that even the Lego Group knows that they’re on shaky ground. [Interestingly enough, their company profile also tells the story about the company receiving a patent for their "Lego System" in 1958 - which would have long since expired. In the US, usually (but not always), intellectual property is protected by only one type of protection. You don't get to gain a copyright after your patents run out. Either it's a tangible, useful good... or it's a work of art.]

All in all, I think Spinal Tap gave up WAAAAAAYYYY too early on this one. What’s next? Do recording artists need the permission of their guitar manufacturers (which, btw, are covered by copyright by some designers) to play their guitars in their videos? Of course not. The guitar manufacturer still holds copyright – but they gave UP the right to restrict where it was played in order to sell the guitar. Same is true for the Lego Group.

Anyone else wanna’ weigh in on this?

Jeff Gordon on Supply Excellence

2009-08-26T01:35:20Z

Justin Fogarty from Supply Excellence e-mailed last week and asked me (and some others as well) about what we thought would be the biggest supply chain risks in a recovery. He was kind enough to think that my response on “Instant Amnesia” warranted a guest post on Supply Excellence. Thanks to Justin for the opportunity!

More on Trust

2009-08-24T21:48:43Z

A few months ago, I wrote that you can’t contract trust – that if you don’t trust someone, the contract isn’t necessarily going to help. D.C. Toedt picked up the baton and discussed how parties can help build trust between two parties (presumably who do not have an existing history). I really liked his points on the prenuptual provisions folks could employ and I was struck specifically on his followup point that merely proffering a balanced document to start contract negotiations could set a positive stage. I hadn’t really given it too much thought before, but I realized I’m biased based on the first document I receive prior to the start of negotiation.

I’m sure it sounds silly. Heck, it sounds silly to me. Even though I consider myself fairly introspective, I hadn’t considered this bias before. I hadn’t considered that I prejudged my negotiation adversaries based on a piece of paper. But there it was. I am a balanced-contract bigot.

I do not think well of people who allow unbalanced template contracts to leave their outbox headed in the direction of @licensinghandbook.com. I don’t like the language, I don’t like taking the extra time spent reviewing such agreements, I don’t like re-inserting and re-balancing the same typically imbalanced sections over and over again. So once I am forced to do it, I hold it against the people who sent me such an off-kilter document.

This isn’t good.

First of all, it’s probably not their fault. Most of the contracts people I meet didn’t write their own templates – and those that do, probably have to cede control over the final verbiage to another set of individuals. Second, even if they did write the language, there’s a certain amount of zealous advocacy I respect and admire that comes out as one-sided contract provisions. But overall, as a professional negotiator, I believe Herb Cohen got it right when he said that our job is to “care, but not that much.”

I also think that I’m biased because even when I don’t have complete control over templates used by my myriad employers, I always try to encourage contractual balance … especially in those contract sections where I know balance will eventually occur in each negotiation. (Quite frankly, it’s a time waster to have to re-negotiate each of those sections and I’d make those recommendations if for no other reason than to save myself effort.)

So the lack of respect I feel towards people who allow these imbalanced agreements to come my way at least affects my very first impression and initial response. This can come across in any number of emotional behaviors (I can be pissy, stand-offish, brusque, curt, argumentative, etc). Note that none of them are positive emotions. So what do you think the other sides’ response is to my behavior? Typically, it’s mirroring (and not the positive kind). In the end, my behavior contributes to the destruction of trust. Not a good place to be to successfully negotiate an agreement.

What do I do? The bias is there. And I’m never going to be happy about imbalanced agreements. Well, I can:

start by making sure that I continue to advocate for balanced contract provisions based on actual risk allocation;
check my attitude at the door when I receive a new agreement and remember that the person who sent it didn’t necessarily control the drafting;
ask for a more balanced agreement to serve as the starting point (if the other side doesn’t have one, we can always use mine); and
do as D.C. suggests and proactively note the balanced provisions in my template when I send it.

Perhaps, most importantly, I can remember that I am 50% of the trust equation and need to act in a manner both deserving and proffering of trust. Thanks to D.C. for reminding me of one of my responsibilities as part of the negotiation process.

This Week on The Web 2009-08-23

2009-08-23T04:10:39Z

The things that happened around the web this week – maybe you already read about them, maybe you need to again:

no one wants money but everyone wants something that money can buy: http://bit.ly/KGzyN (@vpynchon – even if she’s on vacation)
BSA softens anti-piracy msg: http://bit.ly/2027C Too bad there’s not an attempt-version of piracy yet … overstepping even in humor.
RT @PeterKretzman @DavidLinthicum @dhinchcliffe: An Analysis of the Top Cloud Vendors’ cost: http://bit.ly/fIYJw.
RT @jayshep: Lawyers are saving the world … with disclaimers: http://bit.ly/803Zp (via Client Revolution)
New blog post: Library of Congress http://bit.ly/9Vrvl
Just started a Twibe. Visit http://twibes.com/softwarel… to join.
RT @vpynchon: Just joined a twibe. Visit http://twibes.com/attorney to join
RT @gtiadvisors: RT @LexMonitor: RT @carmenhill: Social media policies critical for reducing legal, business risks http://bit.ly/uFfBU
Just started a Twibe. Visit http://twibes.com/negotiation to join.
Just joined a twibe. Visit http://twibes.com/Supply_Chain to join
RT @dahowlett: Blogged: Friday rant: Software maintenance; it’s all Manny’s fault – http://bit.ly/AgmU7 – hat tip @monkchips
RT @PeterKretzman @samj: Twitter’s trademark on Twitter is questionable http://bit.ly/MrI1q (PK: Twitter again shoots self in foot)
RT @gtiadvisors: RT @jayshep: Great noncompete roundup from Trade Secret Noncompete Blog by @russellbesq: http://bit.ly/12VjKM
RT @gtiadvisors: RT @GaryHonig: The 10 Stupidest Tech Company Blunders http://tr.im/wJI5
RT @ManVsDebt: How to Deal with a Bad Deal – http://cli.gs/sR8uUR – (via @mattjabs on @fcn)
. @vpynchon on Breaking through negotiation impasses. http://bit.ly/1yxhC5 If you’re not already reading Victoria, start now!
RT @DreamSimplicity: Coupa SaaS Procurement offered Free to Government: http://tinyurl.com/l5hkco < dunno if it’s any good, though
@SethGrimes @fscavo here’s another thought. Both OSI and FSF require freedom… both also require eventual free “beer” too.
@SethGrimes @fscavo I think u should read GNU’s explanation first: http://bit.ly/AdeF an example OS isn’t necessary to prove one COULD exst
RT @fscavo: Seth Grimes has it exactly backward: open source is free as in “free speech,” not as in “free beer” http://is.gd/2mRl1
RT @iasta: Identifying and Controlling Hidden Costs: Why are inbound shipments unique? http://bit.ly/2uKggU
RT @gtiadvisors: RT @BobWarren: 12 Negotiating Tips for Job Seekers http://tinyurl.com/l677wl
RT @fscavo: Brian Sommer takes a humorous poke at vendors who are less-than-transparent in their public conference calls http://is.gd/2n5Y3
Monetizing potential infringement instead of suing (or issuing takedown notices): http://bit.ly/yWy0n < good job Google and Chris Brown
Mastering the art of everyday negotiations: http://bit.ly/JB3hU (from PsychologyToday) < always remember that everything is negotiable
Maximizing value of software IP: http://bit.ly/eObWI < good info, esp for developers just starting out on their own
(@spendmatters) on M&A due diligence in S/W world: http://bit.ly/s6Fo2 < thanks for the chance to share, Jason
Ways consultants get burned in their contracts: http://bit.ly/QxSuL Call me for help if you’re in a similar situation.
RT @SE_blog: Negotiating w/ Sole Source Vendor http://bit.ly/niu8g “Bring in the Heavies”

Library of Congress

2009-08-22T15:52:49Z

I visited the Library of Congress about a year ago on a quick trip to DC. I figured that stopping by the Library to see if the Software Licensing Handbook was actually on a shelf wouldn’t hurt (yes, it’s a little egotistic, but everyone needs a boost every now and then). The process to actually browse the stacks, however, is fairly involved. You have to obtain a Library of Congress reader card. This involves payment of a fee and a photograph which eventually results in a hard plastic ID card. Taking the card to the librarians enables you to retrieve a book to sit and read. But when I asked the librarian for a copy of the Software Licensing Handbook, they didn’t have one on the shelf. I was crestfallen.

Only then did I make my way to the Copyright Office to inquire about the process. Part of the official copyright process is to file a registration certificate with the Registrar of Copyrights at the Library of Congress. The form, two original copies of your work and the filing fee arrive in Washington, D.C. and meet with the scrutiny of an office filled with submissions from around the globe. The individual reviewer who is going to finish your paperwork and send you back a registration certificate is also part of the process who determines whether your particular work is worthy of storage on the shelves of the Library.

The Registrar’s office explained to me that they simply have so many things come in the door that not everything is actually kept (they add about 10,000 items per day, though). They were extremely gracious, however, in attempting to look up my book. And they were very soft-shoed about trying to let me down gently that it hadn’t been selected for inclusion in the collection. In fact, they told me that in many cases, the materials are sent around DC to other offices – Congressmen/women’s office, Legislative Affairs offices, even the US Supreme Court… all depending upon the subject matter of the particular work and the potential relevance to any matters currently being discussed.

I took being dismissed with grace. But I had to admit to myself that part of the reason that I wrote the Software Licensing Handbook was to provide a resource for the future – something that I could always say I contributed to the greater knowledge of the population. My goal, essentially, was to have the book in the Library’s collection – forever more a part of history. It is therefore with great pride (and yes, even humility now that I understand the scope of the work at the Registrar’s Office), that I am able to say that the second edition of the Software Licensing Handbook is now a part of the permanent collection at the Library of Congress. If you don’t already have a copy, get your LoC Reader Card on your next trip to DC and check it out for a little light reading.

This Week on The Web 2009-08-16

2009-08-16T20:25:39Z

The things that happened around the web this week – maybe you already read about them, maybe you need to again:

RT @gtiadvisors: RT @AdvertisingLaw: Blog Post: Content Protection and Copyright http://bit.ly/1Q0CX
New blog post: Confidentiality Exclusions versus Disclosures http://bit.ly/4qYdND
Tech workaround could allow MS-Word sales to continue: http://bit.ly/haM2S
If you buy/sell software, get your free copy of the Software License Risk Matrix: http://bit.ly/14AJ0E
. @insurancecvg on Coverage Disputes over Data Breaches: http://bit.ly/zaK87
RT @ManVsDebt: frugal misery… when people try to apply cost-cutting tactics in areas that have a high personal value: http://bit.ly/rUDJ3
I have available time for a new client if anyone is looking for ways to save money on IT procurement-related spend. Give me a buzz for info
You don’t get what you deserve, you get what you negotiate (@activegarage): http://bit.ly/vW2KU
RE: @park3 Thanks Jay. I’m still not sure that the distinction you point out really changes the analysis. Even in a… http://disq.us/1szo
Who do you think is the best negotiator? 10% say William Shatner. Seriously? http://bit.ly/tP1SA
RE: @park3 I don’t know that there is a rule. In fact, after years of thinking about it, the only rule is that there i… http://disq.us/1sxz
Microsoft software clampdown nets 11 firms (via ZDNetUK): http://bit.ly/fVRFs
RT @gtiadvisors @taxgirl: http://bit.ly/rPlPd < Why I recommend negotiation experts over corporate lawyers.
RT @skydiver: http://bit.ly/JetPass – all you can fly in one month on jet blue – $599. < Sourcing folks should watch how this plays out.
RT @gtiadvisors @colleencunningh @CoreyVickers @BettyFeng CFOs ignoring supply chain risks http://bit.ly/qtgK8 < I knew it… crap.
RT @drjimanderson: Classic Sales Negotiation Tactic – I’ve Got to Talk to My Boss: http://bit.ly/wYU4j < Power tactic, learn to respond
RT @harrymccracken: Texas Judge tells Microsoft to quit selling Word: http://bit.ly/ybXzR < This doesn’t affect current owner/users of Word
When describing calculations in contracts – SHOW AN EXAMPLE, it might save your butt later! (@ontechcontracts): http://bit.ly/NXrsr
New blog post: Jeff Gordon Quoted on SpendMatters Today http://bit.ly/zPTbo
Simon Cowell’s lessons in salary negotiation http://bit.ly/1Es4p
Thanks to Jason Busch (@spendmatters) for an opportunity to talk about M&A wrt licensing deals: http://bit.ly/ANzzA
RT @fscavo RT @rwang0 Hearing about how hard it is to leave some #saaS vendors. Automatic renewal may not be the way to go! < Same here
Follow the Five Fundamental Skills for Effective Negotiation and this won’t ever be an issue: http://bit.ly/oKM7J
RT @ontechcontracts 3-step way to ID contract contingencies: http://bit.ly/N7Ldu < I was just talking about this. Good article!
RT @fscavo: Stupid contract clauses that hinder business partner relationships http://is.gd/2aOYc Good post by @Figliuolo
RT @WieseLawFirm: Thoughts on developing leverage and why it’s important in negotiations: http://is.gd/2aE28 < I call it Power in the FFSfEN
Privacy policies just got interesting in ME (and applicable to everyone doing anything online): http://bit.ly/FFtYn (HT to Deena Burgess)

Confidentiality Exclusions versus Disclosures

2009-08-14T14:56:42Z

When dealing with confidential information, one of the key areas of concern is where information that would otherwise be considered confidential loses its protection. In most contracts, there are four situations where confidential information ceases to be confidential information and can be released. Information that:

was in the public domain prior to, at the time of, or subsequently to disclosure;
was in the lawful possession by recipient prior to disclosure and was not already covered by a confidentiality provision;
is subsequently acquired by recipient through lawful means from a third party who is not under an obligation of confidentiality; or,
is subsequently developed by recipient without use of or reference to the confidential information.

For these four items, information that was confidential now is not.

There’s a fifth reason which would allow for disclosure, but I argue, shouldn’t change the nature of the information from confidential to non-confidential: disclosure pursuant to court order or legal process.

In this fifth scenario, we’re talking about a situation where a court of competent jurisdiction orders the release of information, usually to the court, as part of a judicial (or extra-judicial, like arbitration) process. The information is going to be disclosed because of it’s probative value – that simply because it’s confidential doesn’t mean that the court shouldn’t consider it as part of whatever is the subject of the litigation.

But that doesn’t mean that I want that information to change status to non-confidential information. Rather, what I want is to keep that information confidential even AFTER the judicial review. This is possible through the use of protective orders and other legal procedures. But if your contracts say that a judicial process will change the information’s status to non-confidential, a single well-strategized lawsuit can unintentionally release a lot of otherwise-confidential information into the public domain.

The best way to handle this is to make sure that your confidentiality provisions clearly segment release of confidential information pursuant to a court order from the other four reasons by which confidential information becomes non-confidential. Additionally, include language that requires the disclosing party (the one responding to the court order) to:

Notify the owner of the confidential information that such court order is being pursued/followed/responded to.
Reasonably assist the owner of the confidential information in obtaining any available legal protections.
Only disclose the specific confidential information requested by the court order (not just hand over everything).

Jeff Gordon Quoted on SpendMatters Today

2009-08-12T00:30:40Z

Today’s edition of SpendMatters discusses merger and acquisition issues as they relate to software licensing. Jason Busch was kind enough to seek my opinion on the matter and through my long and winding response, he pulled out the best nuggets.

At the end of the day, the time to think about M&A-related stuff is when you’re entering into each relationship… not when the vendor announces they’re getting bought or sold.