One of the key issues that must be examined when negotiating or drafting any contract is how the parties may get out of, or “terminate,” that contract. While many attorneys will rest on standard “termination for breach with notice and cure” language, the recent case of Powertech Tech. v. Tessera, Inc. demonstrates how artful drafting can put limitations on a party’s right to terminate. The Opinion in U.S. District Court for the Northern District of California case No. C 11-6121 can be found here.

Powertech and Tessera were parties to a patent license agreement, although the court’s reasoning does not seem limited to only those types of agreements. The license agreement allowed Powertech to use Tessera’s patents in exchange for payment of license fees.

The contract contained the following clause regarding termination for breach:

“Termination for Breach. Either party may terminate this Agreement due to the other party’s breach of this Agreement, such as failure to perform its duties, obligations, or responsibilities herein (including, without limitation, failure to pay royalties and provide reports as set forth herein). The parties agree that such breach will cause substantial damages to the party not in breach. Therefore, the parties agree to work together to mitigate the effect of any such breach; however, the non-breaching party may terminate this Agreement if such breach is not cured or sufficiently mitigated (to the non-breaching party’s satisfaction) within sixty (60) days of notice thereof.”

The court held that Powertech was not permitted to terminate a license agreement with Tessera for Tessera’s breach because Powertech itself was in breach of the agreement by its failure to pay royalties to Tessera.

Acknowledging Powertech’s argument that Tessera was itself in breach, that in and of itself did not give Powertech the right to terminate the contract. Only a “non-breaching” party may terminate the agreement. Said the court “[a]lthough the first sentence of the termination clause is broad – ‘Either party may terminate this Agreement due to the other party’s breach’ — the language of the clause as a whole makes clear that only a non-breaching party may terminate. Reading the clause as a whole, the court concluded “[t]he termination clause refers to a “breaching party” and a “non-breaching party” in every sentence after the first… [therefore]…the clause requires the party seeking to terminate for the other party’s purported breach to be substantially in compliance with its own obligations first.

The Powertech agreement’s termination clause is useful because it put conditions on a party’s ability to terminate the agreement even when the other party was in breach.

Although courts have called the Internet “one large catalyst for rumor, innuendo, and misinformation,” nevertheless, it provides large amounts of evidence that may be relevant to litigation matters. Increasingly, courts are facing presentation of, and challenges to, data preserved from various websites. According to a survey conducted by the X1ediscovery blog, there are over 320 published cases involving social media/web data in the first half of 2012.

Evidentiary authentication of web-based data, whether it’s Internet site data available through browsers, or social media data derived from APIs or user credentials, presents challenges. Given the growing importance of social media posts and data, businesses should be prepared to offer foundational evidence to authenticate any posts that are vital to a case.

Authentication of social media and web data is a relatively novel issue for many courts. Courts have been extremely strict in applying foundation requirements due to the ease of creating a profile or posting while masquerading as someone else. Therefore it is important to go beyond the surface of a social media profile or a post to provide the foundation necessary to authenticate what he evidence for use in court.

Regardless of the type of data, it must be authenticated in all cases. The authentication standard is found in Federal Rule of Evidence 901(a), “The requirement of authentication … is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims.” United States v. Simpson, 152 F.3d 1241, 1249 (10th Cir. 1998).

The foundational requirement of authentication is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims. See US v. Tank, 200 F. 3d 627, 630 (9th Circuit 2000) (citing Fed.R.Evid. 901(a)). This burden is met when “sufficient proof has been introduced so that a reasonable juror could find in favor of authenticity.” This burden was met where the producer of chat room web logs explained how he created the logs with his computer and stated that the printouts appeared to be accurate representations. Additionally, the government established the connection between the defendant and the chat room log printouts based on IP addresses.

See also, Perfect 10, Inc. v. Cybernet Ventures, Inc. (C.D.Cal.2002) 213 F.Supp.2d 1146, 1154, and Lorraine v. Markel American Insurance Company, 241 F.R.D. 534, 546 (D.Md. May 4, 2007) (citing Perfect 10, and referencing additional elements of “circumstantial indicia” for authentication of electronic evidence).

Clearly, there is an emerging trend in the use of social media and web data as evidence. As the use of this type of evidence increases, so too will the consistency and predictability of the foundational matters required by courts. Thus, businesses are well advised to include web collection and social media support in the investigation process so they are prepared to offer the necessary foundational evidence to authenticate any social media posts that may be vital to a case.

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Is it “misappropriation of a trade secrets” to contact each person who follows an ex-employer’s Social Media profile for purposes of promoting a competing business?

Early in my law school career, one phrase stuck with me right away: “tough cases make bad law.” This, of course, begs the question, what makes a “tough” case. Usually it’s a unique fact pattern that has limited applicability to a broader spectrum of cases. In the nascent and growing area of Social Media law, there is no shortage of quirky cases.

My hat is off to Eric Goldman who recently blogged about a social media case that is “tough” because of the way that the lawyers framed the issue. On its face, the case of Christou v. Betaport is an unfair competition case between a night club owner and one of his former partners. The case, being tried in a federal court in Denver, Colorado, involves  trade secret theft and antitrust allegations and alleged misuse of MySpace “friends.” Essentially, the complaint alleges that Roulier, a principle of Beatport and former associate of Christou, used a MySpace account to promote his club at the expense of Christou.

Goldman gets to the heart of why this case is tough: “the plaintiffs allege that they “secured the profiles through web profile login and passwords.” This is a garbled allegation.” Put another way, the lawyers whose job it is to supply the facts that frame the issues, probably meant to say something else. According to Goldman the plaintiffs probably meant that the defendants accessed an account impermissibly and in so doing accessed information they did not have a right to access. In terms of a claim for trade secret misappropriation, the harm came when defendants used that information.

I like Goldman’s article because he takes the time to break down both the confused framing of the issue, but also the court’s apparent confusion with how to address it. It’s a short article and definitely worth the few minutes it takes to read.

From my perspective the key take-away is a perspective on the trade secret implications of Social Media accounts. Business and their lawyers are constantly trying to evaluate the legal risks of Social Media and provide guidance on how best to mitigate those risks.

Protecting a Social Media account as a trade secret seems a tricky proposition. Ostensibly, the primary “value” of an account is the list of “followers.” A list that is publicly available is, therefore, not a secret. A better approach is to treat the login credentials themselves as the trade secret since this control’s ones ability to access the account and to communicate with those followers.

Please feel free to comment and follow me here: @adlerlaw

Five Things To Know Now

April 29, 2011

Here are five interesting articles to look at this weekend.

1. Copyright Fair Use Gets a Boost. Last Friday, the federal district court in Nevada held that the non-profit organization Center for Intercultural Organizing’s posting of a copyrighted news article was a non-infringing fair use. The well-reasoned opinion sets a powerful precedent for fair use and against copyright trolling. http://www.eff.org/deeplinks/2011/04/righthaven-v-cio-it-s-hard-out-here-troll

2. Proper Authentication of Social Media “Evidence” Used at Trial. The Maryland Court of Appeals in the case of Griffin v. State examined a relatively new social media legal issue: determining the appropriate way to authenticate at trial electronically stored information printed from a social networking site. http://www.marylandinjurylawyerblog.com/2011/04/the_maryland_court_of_appeals_2.html

3. Commercial Privacy Bill of Rights Act of 2011 Does Not Spell Do Not Track. Although the proposed law requires disclosure of “clear, concise and timely notice” of a company’s privacy policies and practices regarding the collection, use and distribution of personally identifiable information, the bill does not include specific authorization for a do-not-track mechanism. http://www.itbusinessedge.com/cm/blogs/bentley/senators-formally-introduce-online-privacy-bill/?cs=46477

4. Is Your Web Site Eligible For Trade Dress Protection? While Copyright law protects certain original expression from unauthorized copying, Trade dress law protects commercial use of certain distinct features in connection with a product or service. When consumers associate such “look & feel” features with a product or service, trade dress protection exists. Protection has been extended to the packaging of a product, the décor of restaurant, the design of magazine covers, and even kiosk displays.

In Conference Archives v. Sound Images, 2010 WL 1626072 (W.D. Pa. Mar. 31, 2010), a federal district judge in the Western District of Pennsylvania suggested that under the concept of “look and feel,” trade dress law can reach beyond static elements on a website, such as photos, colors, borders, or frames, to include interactive elements and/or the overall mood, style, or impression of the site since a graphical user interface promotes the intuitive use of the website.” Conference Archives, 2010 WL 1626072 at *15.

5. Do We Need An Open Wireless Regime? See what the EFF has to say. http://www.eff.org/deeplinks/2011/04/open-wireless-movement

ABOUT THE AUTHOR

David M. Adler, Esq. is an attorney, author, educator, entrepreneur and founder of a boutique intellectual property law firm based in Chicago, Illinois. With over fourteen years of legal experience, Mr. Adler created the firm with a specific mission in mind: to provide businesses with a competitive advantage by enabling them to leverage their intangible assets and creative content in a way that drives innovation and increases the overall value of the business. Learn more about me HERE and HERE

David M. Adler, Esq. & Assoc.: Safeguarding Ideas, Relationships & Talent®

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Hiring a lawyer

While small businesses often need some legal advice, they can’t always find a professional with the right expertise at a budget the small business can afford.  Since small businesses usually don’t need lawyers that often, when it comes time to review a contract, buy out a partner or protect their brand and trademark, they often don’t know where to start.  The purpose of this article is to give executives a business owners a guide on how to ask a prospective lawyer the right questions to get the service one needs at a price that one can afford.

To get answers to questions about hiring a lawyer, please select one of the links below.


How do I hire a lawyer?

Lawyers are highly-trained professionals who counsel individuals and businesses in a full range of personal and corporate legal matters. Many business transactions have legal implications, so you should try to find a lawyer whom you can treat as a trusted advisor. These questions are designed to help you choose the right lawyer for your situation.


What can a lawyer do for me?

Lawyers provide legal guidance. This doesn’t mean that they can make your business decisions for you. A lawyer should identify legal issues of concern to you or your small business, tell you what the law says about these issues, and advise you on how to address them.


How can a lawyer help me in setting up a business?

A lawyer can:

  • Explain the advantages and disadvantages of a sole proprietorship, a partnership or a corporation;
  • draft a partnership agreement or incorporate your company;
  • review financial documents for your business such as a loan;
  • review leases of premises or equipment;
  • act for you in the purchase of property;
  • review franchise agreements;
  • draft standard form contracts for use in your business;
  • advise you how to best protect your ideas, trademarks, designs and know-how.

How can a lawyer help when my business is up and running?

A lawyer can:

  • help you negotiate contracts and put them in writing;
  • advise you on hiring and firing employees;
  • advise you about doing business in other provinces and countries;
  • help you collect unpaid bills;
  • defend any lawsuits against you;
  • advise you about taxes.

If I decide to get out of business, how can a lawyer help me?

A lawyer can:

  • help you sell your business;
  • help you sell you ownership interest if you are one of several owners;
  • arrange for the transfer of the business to your children;
  • dissolve a corporation or LLC.

When do you need a lawyer?

The recommended approach is to seek the advice of a lawyer whenever a legal issue arises that involves your business. Since it is not always clear when that happens, many problems are solved without resorting to lawyers. When an issue arises, you must first decide whether you need a lawyer at all. In order to know if you should solve your problem on your own, ask yourself the following questions:

  1. What are the consequences if you are unsuccessful?
  2. How complex is the law in your situation?
  3. Do you have the time and energy?

If you are still unsure, some outside professionals, advisors or para-professionals may be useful:

Check with your Board of Directors or Board of Advisors; they can provide information about the steps they went through and the resources they used in solving their problems. Contact government and non-profit organizations for income tax, legal aid, consumer protection, employment standards, etc.

Check with other professionals: accountants, bank officers, insurance agents. For some routine matters, legal assistants, para-legals and notaries public are useful. While not allowed to give legal advice, they can provide added value in familiarity with standard corporate forms and filing requirements.

Also, don’t forget public libraries, legal aid services, student legal services, small claims courts, reading self-help books and other resources such as books, pamphlets and videos.


How do I contact a lawyer?

Give him a call. Most lawyers are happy to steer people in the right direction and calm fears about the legal process. There are several advantages to this approach. The main one is that a lawyer can quickly cut to the heart of your problem, distinguish between legal and non-legal problems. Another advantage is that you usually will not be charged for this phone call. Finally, a lawyer will not only keep your problem confidential, but has the ability to assess it from a less emotional perspective.

Please feel free to call us at (866) 734-2568 should you have any questions.


How do I find a lawyer?

First, try to identify the areas of law in which your problems fall so that you can find a lawyer capable with dealing with all these areas. Some of the main areas of legal practice linked to business are:

  • Corporate/commercial/securities law (incorporation, buying/selling a business, drafting shareholders/partnership agreement)
  • Labor/employment law (negotiating and interpreting collective agreements, resolving disputes, explaining obligations, advising about restrictive covenants, dismissals)
  • Civil litigation law (suing, being sued, collecting debts, negotiating and settling)
  • Real Estate law (buying or selling land or property, negotiating a lease, solving landlord/tenant disputes, mortgaging property)
  • Wills and estates (drafting or challenging a will, probate)

What should I ask a prospective lawyer?

Some questions you should ask a prospective lawyer are:

  • How many years are you in practice?
  • How long have you been with your current firm?
  • What areas of law do you practice?
  • Are you a partner or an associate?
  • Time and accessibility
  • How quickly can I expect a resolution?
  • When can we meet?
  • How much can I expect top pay?
  • How do you charge for your services?
  • Do you provide your clients with a detailed written statement of fees?
  • Do you charge anything for the first meeting?
  • Do you communicate via telephone, cell phone, fax or email?

How can I help my lawyer?

Ways you can help your lawyer include:

  • Be honesty and open
  • Tell the lawyer all the facts, even the ones that you think are “bad”.
  • Keep your lawyer up to date on any events or any changes relating to your file.
  • Ask for advice in plain language and summarize how you understand it.
  • Ask to be directed to any reading that you could do to better understand.
  • Ask for a description of the steps your lawyer plans to take and think about the way you could help at each step.
  • Stay informed and keep track of what transpires on your file.
  • Take notes at all meetings and list tasks to be completed.
  • Ask for copies of all correspondence on file.
  • Have confidence in your lawyer’s advice and follow his/her instructions.
  • Do not harass your lawyer. If you need more attention, discuss way in which he/she can keep you informed.
  • Be prepared to accept both positive and negative advice.
  • Never do anything concerning your case without consulting your lawyer.
  • Provide information to your lawyer as soon as possible after he/she requests it.
  • Pay your bills on time and be available if your lawyer needs you.

How do lawyers calculate their fees?

Depending on the complexity of the issues, the services required, and the degree of experience of the lawyer, fees can be charged in different ways:

  • Billed hourly: charged a rate for the time they spend working for you (e.g. the time spent reading a letter or talking on the phone).
  • Flat Fee: charge a flat rate for a particular matter, usually when they can predict how long the work will take: incorporations, trademarks.
  • Contingency Fee: in some matters, the lawyer’s fee will be a stated percentage of the amount of money collected from the lawsuit.
  • Retainer: provide a range of specified services for a fixed monthly or annual fee.

In addition, lawyers will also bill for disbursements such as long distance phone calls, photocopies, document filling fees, experts’ reports and travel expenses.


Safeguarding Ideas, Relationships & Talent®

Executives face an often confusing and changing set of challenges trying to ensure that their business remains legally compliant. Yet few can afford the highly-qualified and versatile legal staff needed to deal with today’s complex and inconstant legal and regulatory environment. Adler & Franczyk is a boutique law firm created with a specific mission in mind: to provide businesses with a competitive advantage by enabling them to leverage their intangible assets and creative content in a way that drives innovation and increases the overall value of the business.

We approach our relationship with each client as a true partnership and we view our firm as an extension of their capabilities. Our primary value is our specialization on relevant and complex issues that maintain the leading edge for our clients. We invite you to learn more about the services we offer and how we differ.

On the web: www.ecommerceattorney.com
On Twitter: http://www.twitter.com/adlerlaw
On LinkedIn: http://www.linkedin.com/in/adlerlaw

Subscribe to Ping® The Legal eNewsletter

We look forward to the opportunity to discuss any questions you may have regarding the range of business, technology and intellectual property services we offer. Please feel free to call us at (866) 734-2568 should you have any questions.

David M. Adler will be addressing the Chicago Bar Association’s Media & Entertainment Committee on May 27, 2010 at 12:15 P.M. on the topic of Advising Clients When Creative Content Does Not Equal Copyrighted Content – Transactional & Litigation Strategies and Brief Review of the UrineTown case.

David Adler represented the Chicago stage play team who created, produced, and directed a local run of UrineTown.  In response to threatened lawsuit/s, the team filed suit against another team of producers who formerly staged the play in New York.  (Mullen v. SSDC, et. al.)

One of the key issues addressed in the lawsuit dealt with whether or not creative endeavors such as stage directing and lighting design could be considered recognized works of authorship under the U.S. Copyright Act and defend its denial of copyright registration applications filed by the Broadway production team.  Prior to settlement, the U.S. Register of Copyrights filed a motion to increase the time with which to enter into the case.  There are numerous implications with respect to copyright protection and how to best serve your clients interests.

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