Making It Legal:

A little legal levity for a Friday afternoon. Enjoy!

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Advice from lawyers

George and Lenny decide to cross

George lets some hot air out of the balloon, which slowly descended below the clouds, but he still couldn’t tell where they were. Far below, they could see a man on the ground. George lowered the balloon to ask the man their location.

When they were low enough, George called down to the man, “Hey, can you tell us where we are?” The man on the ground yelled back, “You’re in a balloon, about 100 feet up in the air.”

George called down to the man, “You must be a lawyer.” “Gee, George,” Lenny replied, “How can you tell?” George answered, “Because the advice he gave us is 100 percent accurate and is completely useless”.

The man called back up to the balloon, “You must be a client.” George yelled back, “Why do you say that?” “Well,” the man replied, “you don’t know where you are or where you are going. You got into your predicament through a lack of planning and could have avoided it by asking for help before you acted. You expect me to provide an instant remedy. The fact is, you are in the exact same position you were in before we met, but now it is somehow my fault.”

From the BlawgIt blog of Iowa patent attorney Brent Trout comes this helpful post on the legal pitfalls of social networking. Many entrepreneurial bloggers use their blogs as an opportunity for product reviews. What’s not always known is that bloggers occasionally get paid for those product reviews. It make a difference, doesn’t it–knowing whether a review comes from someone completely objective or a paid promoter? If getting paid for your reviews were part of your business model, don’t you think that would color the kind of review you gave?

As Trout points out, the Federal Trade Commission has made it clear that if a paid endorsement “might materially affect the weight or credibility of the endorsement,” such endorsement must be fully disclosed. Trout goes on to talk about what constitutes “disclosure” and how you can be guided accordingly.

More naches and brag–this time on the issue of extending credit to customers. See Melanie Lindner’s piece in Forbes.com on “How Much Credit do Customers Deserve?” She and I talked about the changing economic climate (euphemism) and whether it made sense for businesses to extend credit to customers.

Whenever you extend credit (which occurs any time you don’t get paid at or before the time you provide your product or service), you take a risk of not getting paid . . .  at all. It doesn’t take a Harvard MBA to understand the negative impact that has on your cash flow.

One way to lessen the blow is to charge interest or late fees on outstanding balances. However, you can’t do this without letting your clients or customers know in advance–and courts won’t grant you interest (or late fees) unless they’re part of your written contract. So make sure you have this provision in your agreements . . .  and create a system for collecting debts so they don’t fester. The longer it’s outstanding, the less likely you are to collect the money that’s rightfully yours.

Did you know that yesterday was Law Day? I suppose that for many of you, the day passed with nary a whiff of the incredible celebrations to be had. Parades in the street! Inspirational speeches! Revelry! Bar associations around the country use it as a day to celebrate community and the importance that law plays in it.

50 years ago, May 1 was designated by a joint resolution of Congress as the official date for celebrating Law Day. Originally established by President Dwight D. Eisenhower (by proclamation), Law Day is a national day set aside to celebrate the rule of law and how the legal process contributes to the freedoms that all Americans share.

Before you start to tear your hair out about the ways that laws have complicated your life, take a moment to think about the ways that law has made our society great. People from all over the world risk life and limb, and leave their families behind, to come here. Laws contribute to this being the “land of opportunity.”

Law Day is not just a day to make lawyers feel good about themselves–if you think about what the world was like in 1958, when Law Day was first established, we had emerged from the ashes of World War II, seen two wars in the Middle East, gone in and out of Korea and watched the French get defeated in Vietnam. The U.S. Supreme Court case Brown v. Board of Education (”separate does not mean equal”) had been decided only a few years before and opened the door to significant social change in this country. Law was (and can still be) a way of righting a terrible imbalance of tyranny and unfairness.

We may debate whether laws are wise, necessary or fair, but few would dispense with them altogether. We use laws both to provide our freedoms and to protect our freedoms.

And now, I’m free to get off my soapbox and enjoy the rest of the day!

From the Department of Naches (Yiddish for “joy”) and Brag, I was interviewed by Forbes.com on one of my favorite subjects: business partners. How to choose them, what to look for and what to put in your business partnership agreement (or shareholders’ agreement or operating agreement–whatever the form of your business).

One of the tidbits I’m really glad made it into the article, “What to Look for in a Business Partner,” was the one stressing the importance of checking your partner’s credit history. It sounds “not nice” to ask such prying questions, doesn’t it? Here’s an ugly way the partnership can play out (I’ve seen it happen) if you don’t:

• Your company needs a bank loan. The bank checks the credit history of all owners (count on it). It refuses the loan because of your partner’s shaky credit history.
• You seek outside financing elsewhere. You can get it (e.g., credit lines) but your partner can’t (because of said credit history). To do so, you 1. mortgage the house or 2. provide a personal guaranty for the credit lines.
• The business needed more than your one credit line could provide, and now you’re both tapped. The business goes under. Guess who’s on the line to pay back the debt? Answer: It’s not your partner.
• Your partner is a slow (or no) payer when it comes to reimbursing her share of the debt. Does the bank or credit agency care? Answer: No. It’s your good credit that could be adversely affected if you don’t have the wherewithal to meet the monthly payments yourself.

Still think it’s “not nice” to ask about credit history?

Today, I feel vindicated. I just came across Laura Bell’s post, “Business Law Basics,” which reminds me of my apartment after it’s cleaned: neat, fresh and pleasant. Her point, delivered gently, is that too many entrepreneurs do deals without having a written contract. It’s like bringing a knife to a gunfight: You may be prepared for trouble, but not well enough to avoid serious injury.

Bell outlines the elements of a contract (important, if you want to understand when the deal is actually “struck”) and why a cancellation clause is helpful.

Exit strategies (the “how-do-I-get-out-of-this-deal-if-it’s-really-not-working-for-me?” language) are a vital part of any business relationship; otherwise, you risk being stuck in a bad situation with no easy (or inexpensive) way out.

Want a quick an easy way to learn more? Check out my booklet guide, Term$ and Condition$, so you’ll know the highlights of what to put in your agreements.

You may not know it by name, but you’ve probably experienced it before. You order a book from a website such as Amazon.com and then get a little popup ad. Or you’re redirected to a page that says, “Nina, if you liked Where the Wild Things Are, you might also like these others books/CDs, etc. . . . ” That’s called “behavioral targeting.” It’s the way that websites collect personal information about you and your preferences and use that information to try to sell you more stuff along the lines of what you already bought. When I’m on a shopping spree and eager to read or listen to something new, I love that feature. How convenient!

But when I think about how my private, personal preferences can so easily become known and shared with others, it’s more than a little disturbing. What if, instead of Where the Wild Things Are, my preferences ran more along the lines of Debbie Does Dallas? Would I really want that known? (Just for giggles, I checked on Amazon.com and yes, you can buy it there!)

There’s a delicate balance between privacy rights and free speech, as Wendy Davis of Just an Online Minute pointed out yesterday. Courts have tended to give less protection to “commercial speech,” which is how ads tend to be classified. But in today’s e-commerce world, does behavioral targeting go further in violating your privacy rights than, say, getting a cold call for investment products during dinnertime? Should you have a right to opt out of these kinds of ads? The Federal Trade Commission is now looking at this issue, so we’ll see where the legal restrictions ultimately fall.

Many thanks again to Lena West of Tech Forward for the tip!

… That is, if you’re the one being infringed.

Disclaimer: I am neither advocating that you rip off anyone else’s content nor recommending that you sit idly by should it happen to you. But sometimes, it can work to your advantage… especially if the people using it are “fans,” where at least some form of atttribution is made to you.

That’s what Sandra Aistars, Time Warner Cable’s assistant general counsel, intimated at a recent digital rights management conference in New York City, reported in Mediapost’s Just an Online Minute. Especially when the use of the content is in the form of parody or other fair use or commentary, it may be in your interest to refrain from bringing an infringement lawsuit if the restraint helps foster a more robust fan base.

But it’s not always easy to tell which uses will be to your benefit. So make sure you consult with an attorney who knows this area.

As my mother is fond of saying, “Watch what you wish for–you may get it.” That certainly applies to the ways in which technology has made an impact on our workplaces. On the one hand, it has opened up a wonderful world of flexibility, new business arrangements and ease of automation. On the other, it has opened up a hornet’s nest of new ways for employers to get stung in employee-related lawsuits.

Just think of the ways that computers and technology have changed the way we work: e-mail, voice mail, conference calling, videoconferencing, PDAs, smartphones, Treos, BlackBerrys, iPhones, internet, intranet, blogs, message boards, Facebook, Twitter, MySpace, networks, ASPs… and the list goes on.

So does the list of legal issues that have emerged as a result:

• Employees freely copying what they see on the internet;
• Posting of inappropriate or offensive content on company bulletin boards or blogs;
• Discrimination in hiring employees through internet job postings;
• Badmouthing a company on personal blogs;
• Using e-mail to discriminate against or to harass fellow employees;
• Employees’ expectations of privacy on their office computers or in their e-mail;
• Requirements for backing up electronic communciations in the event of litigation; and
• Electronic communications policies.

It’s as if you took a bunch of rambunctious children and gave them potentially dangerous toys to play with. If you don’t show them how to use them properly, someone (probably you or your company) will get hurt. If you have employees, speak to an attorney to get guidance on how to handle these issues.

From the “I-couldn’t-have-said-it-more-thoroughly-myself” department, here is a series of helpful posts from Texas attorney Ryan Roberts (”The Startup Lawyer”) on the ins and outs of leasing office space (and not getting ripped off in the process).

Part 1: Why much of what is in a lease is not boilerplate, despite the microscopic print. Understanding the ways that commercial real estate brokers (whom Roberts refers to as “tenant reps”) can help your business… and when they might not be putting your interests first.

Part 2: Fourteen provisions to consider negotiating before your company signs a commercial lease for office space.

Part 3: Eight of the not-so-obvious terms that can bite you if you don’t address them.

“I have the domain name. Doesn’t that count toward a trademark?”

“I did a search online and no one has the name. Why can’t I get a trademark?”

As Nina Yablok’s article, “Trademarks and Google,” touches on, Google isn’t the be-all and end-all when it comes to filing trademarks. That’s why, even in this high-tech, “AG” age, it’s still worth investing in the old-fashioned kind of searches done by real people who are trained to look for obstacles (Current retail price, approximately $600). As my namesake points out, the U.S. Patent and Trademark Office doesn’t look only at exact names or phrases in determining whether there’s a conflict. It also looks at whether a “mark” is sufficiently similar to another to be likely to cause confusion (Note, it doesn’t actually have to cause confusion–just be likely to).

Let’s take an example of two consulting companies–one in California and one in Virginia. Both consult with clients on marketing and PR skills to help hone their essential messages, elevator pitches, etc. The California company uses the phrase, The Spin Doctor. The Virginia company uses the phrase, The Pitch Doctor. The untrained researcher (that is, the entrepreneur looking to do this on the cheap) would probably not be able to come up with enough permutations to cover all the bases… but the people handling the searches can. And it’s likely that the trademark office would look at those two phrases and consider them too similar to allow them to co-exist. If you’re the second to file, it’s likely you’re the one who will have to cede your seat.

If you truly want your company name (or tagline) to become the next household name, realize that it will take time and money to invest in protecting it properly. There’s no point spending money to register the mark, build up the marketing, print the business cards and develop the website, only to have a larger company with a prior claim stomp all over those plans with a cease and desist letter. Invest in the planning and searching before you launch. A good IP attorney can guide you through the process.

You may have had these nasty tidbits enter your inbox: e-mails that seem to come from reputable companies (I got a host of them from “Citibank”) that tout the anti-hacking and identity-theft measures they’re taking. “In order to ensure your security, we need you to verify your contact information by clicking on the link below… etc.” The logo seems in order; it’s written in that “I want to be friendlybut I’m too stiff because my legal and compliance departments were-all over this letter” tone. You are (or at least think you were, at some point), a customer. Makes sense that you should receive it. So you click.

Sadly, all too many people and companies find that, upon doing so, they’ve been “phished.” “Phishing” (according to Webopedia) is a term that means “the act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.” The U.S. Senate has recognized the problem, and Sen. Olympia Snowe (R-ME) recently introduced legislation to provide the Federal Trade Commission with authority to enforce the prohibition against phishing (Of course, whether it authorizes the funding to pay for the enforcement is another matter). (See S. 2661 in the 110th Congress, 2nd session).

Highlights of the Anti-Phishing Consumer Protection Act of 2008 include:

• Prohibiting deceptive domain names (this means using a name like “Citidank” and posing as a banking institution);
• Prohibiting domain name registrars from interfering with efforts to discover the identity of “phishers” who have obtained deceptive domain names;
• Allowing all state attorneys general, aggrieved trademark holders and affected internet service providers to bring lawsuits against the culprits (note, though, individual lawsuits are not expressly permitted, and it would probably be too costly for an individual to investigate and bring a lawsuit against a “phisher”); and
• Restricting damages from exceeding $2 million (except in special circumstances).

The moral of the story: Don’t click on everything you see. Confirm all requests for private information by telephone–and do not use the number you see in that e-mail (it, too, could be a scam). Ask that the request be sent to you by “snail” mail.