Software Escrow No Longer Required
Software escrow requirements once were common in my law practice. In this post, I will explain why that no longer is the case.
I have seen such arrangements principally with respect to software that a developer hosts (software as a service – SaaS). In a software escrow, the developer delivers a copy of the software’s source code to an escrow company. The developer provides updated versions of the source code from time to time.
If the developer goes out of business, the escrow company delivers the source code to the developer’s licensee (customer). The licensee then has the right to use and modify the source code for its own internal purposes. (more…)
Negotiating Software Licenses – What Really Counts
This post addresses the most important issues that are raised in negotiating software licenses.
I will assume that parties have agreed on pricing. (Otherwise, there is no point negotiating license terms!) In addition, I will ignore the lengthy legal “boilerplate” that appears in most software license agreements.
Four Critical Issues in Negotiating Software Licenses
In my experience, there are four issues that must be examined closely, and often result in much discussion, when negotiating software licenses. (more…)
Three Ways to Protect Yourself when Developing Software Offshore
Many startups have software developed offshore to save money. There is good reason to be concerned, however, about loss of money or, even worse, loss of intellectual property when a developer is located half-way around the world. This post discusses ways to minimize those concerns.
I recommend the following:
- Ensure that the agreement with your overseas developer assigns all rights to the software (including all intellectual property rights) to you.
- Don’t send your “family jewels” offshore. For any portion of the development that requires disclosure of your most important trade secrets, use a local developer.
- Time deliverables and payments such that you never will be too severely financially exposed. If your relationship with the developer sours, you can go somewhere else without a catastrophic financial loss.
If you take care of these three points properly, everything else should be pretty routine.
Photo credit: Rajesh Sundaram via stock.xchng
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Does My New Employer Now Own My Software?
This post is adapted (with editing) from a Quora question that I answered. Q. I developed a software application on my own, then adapted it for my new employer, where it is used enterprise-wide. What are my ownership rights in this situation?
A. It would help to know whether you signed any type of proprietary information and inventions agreement with your employer. If you did, its terms (obviously) will be of great importance. You did not mention any such agreement, so I will assume, for the purposes of the discussion below, that there is no such agreement.
Protecting Software: Keeping Trade Secrets while Registering Copyrights
Many software companies rely on a combination of copyright and trade secret protection for their products. There is a potential problem, however: The requirement to submit source code with a copyright registration is somewhat at odds with the confidentiality requirements of a trade secret.
Fortunately, the U.S Copyright Office offers some flexibility in its deposit requirements for software containing trade secrets. The applicant may deposit any of the following: (more…)
Trade Secret Protection of Software has Limits
Developers of proprietary software typically rely copyright and trade secret protection of their works. A recent California case (Silvaco Data Systems v. Intel Corporation) illustrates how far trade secret protection does, and does not, go.
Silvaco develops and markets electronic circuit design software. Silvaco won a suit against Circuit Semantics, Inc., claiming that CSI, with the help of two former Silvaco employees, misappropriated Silvaco trade secrets, in the form of source code, by incorporating them into CSI’s software. Silvaco obtained an injunction against continued use of the technology incorporating its trade secrets.
SaaS Use of Open-source Software is not Distribution (Who GNU?)
I recently answered a LinkedIn question about whether providing Software as a Service (SaaS) is considered a “distribution” under the open-source GNU General Public License. The question and answer (no longer available on LinkedIn) are reproduced, in slightly edited form, below.
Q. Is hosting a software as a SaaS offering considered as “distribution” under GPL / LGPL open source licenses?
A. I believe that SaaS hosting is not intended to be considered distribution.
Autodesk Wins: Software License Restrictions Trump “First Sale” Doctrine
Update: On September 10, 2010, the Court of Appeals for the Ninth Circuit (in Vernor v. Autodesk) reversed the District Count decision discussed below. Supporting software licensors’ reasonable business expectations, the Court held “that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” [Emphasis added.] Accordingly, Vernor, as a licensee, was not protected by the first sale doctrine when he sold copies of Autodesk’s software.
* * *
In Vernor v. Autodesk, the U.S. District Court for the Western District of Washington told Autodesk that despite the restrictions in its license agreement, Autodesk could not preclude its customer from selling AutoCAD software to a third party.
You May Be a Software Pirate and Not Even Know It
I was retained by a small company that had received a letter from one of its most important software vendors. The letter said the company “may have installed on its computers more copies of… software than it is licensed to use.” It then pointed out that unauthorized duplication of proprietary software violates federal copyright law and the applicable license agreement and that “potential remedies… are significant.” [emphasis added] The letter ended by requesting that my client:
- Audit all of its computers for copies of the vendor’s software and provide the audit results within three weeks
- Not destroy any installed software
- Not purchase any more of the vendor’s software until the matter is resolved
The client’s owner was concerned. She did not know of any illegally installed software; even worse, she was suspicious and uneasy about how the vendor could have such information.
Best Practices in Drafting Software Contracts
On May 19, the American Law Institute approved the Proposed Final Draft of the Principles of the Law of Software Contracts. The 305-page document presents best practices that should be taken into account when drafting software contracts.
Implications of the Principles for Drafting Software Contracts
Here are some implications of the Principles that I find most interesting: (more…)
California Corporate Officers are Employees
This post discusses why – especially now that Assembly Bill No. 5 (AB-5) has taken effect – in California corporate officers are considered employees rather than independent contractors.
California Corporate Officers Employees by Statute
The starting point is California Unemployment Insurance Code Section 621. This Section states, in relevant part:
(more…)“Employee” means all of the following:
(a) Any officer of a corporation.
Creative Commons Commercial Licenses
This post is about Creative Commons commercial licenses. After describing each license, it discusses when you might want to use each license.
Creative Commons provides a summary of its various licenses at About The Licenses. (more…)
Which Types of Intellectual Property Can Protect an Idea?
This post explains why the various types of intellectual property (“IP”) cannot protect a mere idea. However, IP may protect items that one creates based on such an idea.
I first wrote about this subject on Quora. Please see Which types of intellectual property protection can I receive for my idea? (more…)
How Can I Avoid Misappropriating Trade Secrets?
This post discusses how one can avoid misappropriating a former employer’s trade secrets. I first wrote about this topic on Quora. Please see How does one make sure one doesn’t misappropriate software trade secrets?
Definition of Trade Secret
Unfortunately, there is no single definition of “trade secret”. Definitions vary somewhat from state to state, and the U.S. government recently created its own definition. (Please see Trade Secrets Receive Federal Protection.) (more…)
What Does Non-binding Mean and Why Should I Care?
This post discusses the meaning of non-binding with respect to a letter of intent (LOI) or a memorandum of understanding (MOU). (Non-binding has a similar meaning in other legal contexts, such as legislation or arbitration, but I will not discuss those contexts here.)
Although I will refer to solely an LOI in the remainder of this post, the following pertains to an MOU, as well.
Please note that whereas “memorandum of understanding” and “letter of intent” are the terms typically used in the U.S., the corresponding term in the U.K. is “heads of terms“. (more…)
Nonbank Lenders Increasingly Attractive to Small Businesses – WSJ
Nonbank lenders are becoming increasingly attractive to small businesses, according to an article published today in the Wall Street Journal. (Alternative Lenders Peddle Pricey Commercial Loans)
The lenders cited in the article include OnDeck Capital Inc., Kabbage Inc., CAN Capital Inc. and Business Financial Services Inc.
Loans Offered by Nonbank Lenders
Nonbank lenders offer loans that typically are for less than $50,000 and have high interest rates – sometimes more than 50% per year. The article says that such loans, nevertheless, are popular for the following reasons. (more…)
Can I Have a Corporation with Multiple Businesses?
This post is based on a question I have seen online many times. Q. Can I have a corporation with multiple businesses?
A. Yes, you can have a corporation with multiple businesses. Furthermore, those businesses need not be similar or related. So, for example, your corporation might do both software development and per sitting.
However, there is a more important question. Should you have a corporation with multiple businesses?
Which Open Source License Should We Choose?
Software developers may have decided to provide open source software, but they may not know which open source license to use. This post describes three resources developers can consult to help make that decision.
First, Open Source Initiative maintains a comprehensive list of open source software licenses. Licenses are grouped into categories, starting with the most popular licenses. However, the OSI site does not provide any tools to help decide which open source license to use.
Is a Copyright Notice with Multiple Years Legitimate?
We all have seen a typical copyright notice (e.g., “Copyright 2013 Anyhow, Inc.”) countless times. However, every once in a while, someone will see a copyright notice with multiple years (e.g., “2010-2013”) and will wonder whether it is legitimate.
As is explained in Copyright Protection in One Easy Lesson, 17 USC Section 401 states that a copyright notice must contain three elements.
- The symbol © (the letter C in a circle), the word “Copyright”, or the abbreviation “Copr.”
- The year of first publication.
- The name of the copyright owner.
What Happens if the Board Doesn’t Approve My Stock Options?
This post is adapted from a question I answered on OnStartups. Q. I’ve been working for a large private company, and my offer letter said I would receive X number of options as long as the board approved it. It’s been a year and I’ve been stonewalled on the option plan. I’ve sent multiple emails to HR and the controller and the CFO. HR has gotten back to me, but their hands are tied. Can I send a letter and a check to the CFO with $100 to force the issue of exercising some amount of shares and determining the strike price that way?
A. Unfortunately, “subject to board approval” is a common contingency for stock option grants. At this point, I’m not sure there is much you can do about it.
Negotiating Successfully: The #1 Thing You Need to Know
Several years ago, a friend lamented that he was not very good at negotiating on behalf of his professional-services business. He felt that clients were better at “bluffing” and other negotiating techniques than he was, so he often was paid less than he should have been. I told him the single most important thing he needed to know if he wanted to negotiate successfully:
You have to be willing to walk away.
Non-compete Enforced to Protect Trade Secrets
California is well-known for enforcing post-employment non-compete provisions only under narrowly-defined circumstances. A recent case in the United States District Court for the Northern District of California (Richmond Technologies v. Aumtech Business Solutions) saw a non-compete enforced for the protection of trade secrets.
Jennifer Polito, a former employee of plaintiff Richmond Technologies (which does business as ePayware), started working for defendant Aumtech. ePayware brought suit, alleging that Ms. Polito misappropriated ePayware’s source code, license keys and customer list to help Aumtech compete against ePayware. (more…)
Sometimes You *Shouldn’t* Assign All Rights
I have written, on several occasions, about the importance of assigning copyrights (and other intellectual property rights) when work is done by an independent contractor. (See, e.g., Independent Contractors: How to Assign Copyrights.) Sometimes, however – as suggested in a comment to What is a Derivative Work, and Why should I Care? – it is appropriate not to assign all rights.
I Think the Recession is Over
There are two reasons why I now think the recession is over. First, within the past two weeks several clients have seen a dramatic increase in investor / acquisition interest:
- A client that has been offering secure-communication software for six years found fundraising very difficult one year ago. Now it is being chased by four VCs (and may spurn them all for a super-angel investor).
- A client that developed a superior e-commerce solution two years ago received a mid-seven-figure acquisition offer from a well-known software company – and immediately rejected the offer, having talked to an investor who said he would give the client a substantially higher valuation.
- A year-old life sciences company that hasn’t even completed development of its intellectual property – but which has a great underlying technology – is about to receive a low-seven-figures VC investment after putting little time and energy into fundraising.
“Giant Cock” Excluded from Apple’s App Store
Yesterday, in San Francisco, I talked to one of the many foreign attendees at the Game Developers Conference. He told me about a game he had developed, which featured a giant rooster.
In the developer’s native language, the word for “rooster” is similar to the English word “cock”, so he called the game “Giant Cock” and submitted it to Apple’s App Store. Apple rejected the game without explanation. (more…)
Wikileaks and Apple – an Opinion
The following is taken almost verbatim from my answer to a Quora question and the comments that followed. Q. Was the WikiLeaks iPhone app really violating the Apple App Store “Terms of Service”? Apple spokesperson stated that ?Apps must comply with local laws and may not put an individual or group in harm?s way.? Is that actually the case?
A. Yes (in my opinion). Section 3.2(b) of the iPhone Developer Program License Agreement says:
You will not use the Apple Software or any services for any unlawful or illegal activity, nor to develop any Application which would commit or facilitate the commission of a crime, or other tortious, unlawful or illegal act[.]
Why Do We Need a Corporate Records Book?
Corporate Kit from Attorneys Corporation Service, Inc.
I recently answered a question on Quora. If you incorporate a company [in Delaware], should you purchase a corporate kit? My answer about corporate records books, and a follow-up exchange about providing records electronically, are reproduced, slightly edited, below.
A: When I form a corporation for a client, I include a corporate records kit in the fee (and do similarly for LLCs) because:
- It is important – both to the company and to any shareholders or directors who may have an inspection right – that there be a single specified location where the complete, up-to-date corporate records book is kept.
- The kit includes share certificates, which should be prepared – including applicable securities and restrictive legends – and signed to protect against allegations by third-parties that ownership interests were transferred to them.
- The kit includes a corporate seal, which may (or may not) be helpful or necessary at some point.
Open Source Developer Wins Big – But Can He Collect?
BusyBox Logo
Erik Anderson developed certain software that he contributed to BusyBox, a compact set of embedded Linux utilities licensed under the GNU General Public License, Version 2 (the “GPL”). In October 2008, Anderson registered a copyright on the code that he contributed.
On September 2, 2009, Anderson’s counsel notified Westinghouse that it was infringing Anderson’s copyright because it was distributing BusyBox – both integrated into Westinghouse televisions and separately with other software – on terms that are more restrictive than the GPL. Westinghouse continued infringing Anderson’s copyright.
Anderson and the Software Freedom Conservancy brought suit against Westinghouse and 13 other defendants on December 14, 2009. Westinghouse initially mounted a defense, but stopped participating in the suit when it filed for bankruptcy.
Another Reason Why Employees Should Not Disclose Their Passwords
Their are obvious security-related reasons why businesses do not want employees to give their computer passwords the third parties. With the recent decision in Multiven v. Cisco Systems, the U.S. District Court for the Northern District of California has given us a legal reason, as well.
Peter Alfred-Adekeye (“Adekeye”), a former Cisco engineer, left Cisco to form plaintiff Multiven. After his departure, Adekeye used a Cisco employee’s password, with the employee’s permission, to download certain proprietary Cisco software.
Professors Confirm Limits on Startup Interest in Patents
Last November, I wrote You Can Have a Successful Business Even if You Don?t Have a Patent. Many of the points that I made in that post are reiterated in an article that will be published this summer in the Berkeley Technology Law Journal.
The article, “High Technology Entrepreneurs and the Patent System”, is available as a Free Download on the Downloads page. Among the findings presented in the article:
- Whereas life sciences companies see patents as critical, software and Internet companies rely more on copyrights and trademarks.
- Patents are used to reduce competition and to attract capital; they do not provide strong incentives to innovate.
- The major reason why companies do not apply for patents is that they are expensive to obtain and to enforce.
- Many companies find it is more important to be the “first mover” than to obtain patents.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
IP Indemnification: Who Will Be There to Satisfy the Obligation?
Almost a year ago, I posted IP Warranties and Indemnification: How Much is Reasonable? This post addresses a related subject: If you get the other party to agree to indemnify you, who will be around to satisfy the obligation?
A client is in the process of acquiring all of the rights to certain software, which was developed by several recent college graduates who formed a limited liability company (LLC). The client knew to ask for indemnification against claims that the software infringes any third party’s intellectual property rights.
What the client had not thought about, however, was whether the LLC could satisfy the indemnification obligation – which is unlikely, given that the LLC probably (a) has few assets and (b) will be dissolved once the transaction is consummated.
Accordingly, I recommended that we include in the agreement the LLC members’ covenant to satisfy the indemnification obligation if the LLC, itself, doesn’t. The members may be unhappy, but if they want the transaction badly enough, they will agree.
Lesson: An indemnification obligation is only as valuable as the party takes it on.
Photo credit: Anna H-G via stock.xchng
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Court Says Tech Startups Special re Works Made for Hire
In a recently-decided case (JustMed v. Byce), the U.S. Court of Appeals for the Ninth Circuit decided that a software developer was an employee, rather than an independent contractor, even though the parties had completed almost no employment-related paperwork.
Byce took over development of JustMed’s software from an employee who had moved out of state. Byce’s compensation – the same as his predecessor’s – was 15,000 shares of JustMed stock (valued at $0.50 per share) per month.
Open Source Developer Prevails in Copyright Infringement Suit
A federal court of appeals held in 2008 that an open source developer case sue for copyright infringement despite the breadth of the open source license. The closely-watched case recently settled, meaning that the opinion may well be cited for many years to come.
Plaintiff Robert Jacobsen holds a copyright to certain computer programming code that he makes available for public download for free pursuant to the Artistic License, an open source license.
Defendants Matthew Katzer and Kamind Associates, Inc. develop commercial software products for the model train industry and hobbyists. Defendants copied certain materials from Jacobsen’s website and incorporated them into one of their software packages without following the terms of the Artistic License. Jacobsen sued for copyright infringement and moved for a preliminary injunction.
Online Terms can be Binding, even if You don’t have to Click!
This past December, a Missouri Court of Appeals held that a user was bound by a website’s terms and conditions, even though she was not obligated to click to signify assent to those terms (Major v. ServiceMagic, Inc.).
The court noted that where a user is obligated to click to signify agreement to terms, such “clickwrap” agreements are routinely enforced. Where clicking is not required, a site’s “browsewrap” agreement usually will be upheld if the user has actual or constructive knowledge of the terms and conditions before using the site.
Copyright: If You’re Going to Register, Register Right Away
Several months ago (Copyright Registration: Whether, When and Why), I wrote about the benefits of registering a copyright. A recent case in the U.S. District Court for the Northern District of California (Dongxiao Yue, et al., v. Chordiant Software, Inc., et al.) shows that if you are going to register a copyright, you should register it right away.
Plaintiffs accused defendants of copyright infringement with respect to two pieces of software that were covered by registered copyrights. The defendants moved for a summary judgment that plaintiffs were not entitled to statutory damages and attorney fees because the alleged infringement began before the plaintiffs registered their copyrights.
You Can Have a Successful Business Even if You Don’t Have a Patent
I recently met a software developer who wants to start a business. He immediately started talking to me about obtaining a patent. Condensed a bit, our conversation went roughly as follows:
- Dana: Without giving away information that would jeopardize your ability to obtain a patent, what would the software do?
- Developer: It is enterprise customer relationship management (CRM) software.
- Dana: What is novel and non-obvious about it?
- Developer: It will be based on a unique algorithm.
- Dana: You cannot patent an algorithm.
- Developer: I can get a patent on software that implements an algorithm.
- Dana: Perhaps. But there are other means, such as trade secrets, that might adequately protect the software [cut off in mid-sentence]….
- Developer: VCs want to invest in companies that have patents.
Leaving aside the singular focus on VC funding – something that few entrepreneurs obtain (see Realistic Financing Options for Startup Companies) – the would-be entrepreneur was similarly myopic in focusing on a patent as the only type of intellectual property that matters.
Do I really need a lawyer to review this contract?
I have wanted to write this post for several months, but until now I have held off because of concern that it would come across as a lawyer saying “buy my services”. Today, though, a conversation with a client drove home how important this topic is.
On several occasions, clients have asked me to dig them out of trouble that occurred because they had entered into agreements without the advice of legal counsel. Some examples:
What You Need to Know about CAN-SPAM and Third-party E-mail Lists
Earlier this month I posted “Commercial E-mail and CAN-SPAM: What You Need to Know“, which explains CAN-SPAM (15 U.S.C. Sections 7701-7713), the federal law that aims to make commercial e-mail more truthful, more transparent and more avoidable.
This post discusses an interesting variation on the CAN-SPAM theme: Whether and how CAN-SPAM applies when a company uses third-party mailing lists.
Commercial E-mail and CAN-SPAM: What You Need to Know
Unsolicited commercial electronic mail – “spam” – is the bane of the modern electronic existence. In an effort to limit this problem, the One hundred Eighth Congress enacted the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003. This legislation, usually referred to as the “CAN-SPAM Act of 2003” or “CAN-SPAM”, took effect January 1, 2004.
The CAN-SPAM Act
CAN-SPAM has four main provisions, which together aim to make commercial email (including commercial content on websites) more truthful, more transparent and more avoidable.
Client Testimonials
Dana Shultz retired from the practice of law in 2020. As a lawyer, Dana dispensed as much business advice as legal advice. Accordingly, although he no longer is practicing law, Dana occasionally provides business consulting services to owners of small businesses and mentoring services to business lawyers.
If you need legal representation, Dana provides referrals to experienced business lawyers.
The remainder of this page is being retained online for archival purposes.
Client testimonials concerning Dana Shultz and his services (a) are based outcomes that result from each client’s factual and legal circumstances and (b) do not constitute a guarantee, warranty, or prediction regarding the outcome of any client’s legal matter. (Just in case you are wondering, Board of Governors Standard (2) adopted pursuant to CA Rule of Professional Conduct 1-400(E) – now governed by Chapter 7 of the Rules of Professional Conduct that took effect on November 1, 2018 – requires that I provide a disclaimer.)
Please see, in addition to these client testimonials, the recommendations on Dana’s LinkedIn profile. (more…)
How Websites can Avoid Liability for User-provided Content
Two U.S. District Court cases – Io Group, Inc. v. Veoh Networks, Inc. (8/27/2008) and UMG Recordings, Inc. v. Veoh Networks, Inc. (9/11/2009) – offer a recipe by which Internet-based service providers can avoid liability for user-provided content.
Update: UMG v. Veoh was affirmed by the Court of Appeals for the Ninth Circuit on December 20, 2011.
The cases are similar. Veoh operates an Internet-based service that allows users to share videos with others free of charge. Io and UMG (Universal Music Group) brought separate suits, each alleging that Veoh engaged in various forms of copyright infringement because it allowed users to upload videos that infringed the plaintiffs’ copyrights.
In each case, Veoh obtained a summary judgment in its favor based on compliance with the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA), codified at 17 U.S.C. Section 512 (Limitations on liability relating to material online).
You May Be a Content Pirate and Not Even Know It
Last month I posted You May Be a Software Pirate and Not Even Know It. The issues raised there now apply to equally content.
The Software & Information Industry Association is pursuing unlicensed use of content as aggressively as unlicensed use of software. For example, as recently reported in InfoWorld and elsewhere, Knowledge Networks agreed to pay SIIA $300,000 to settle a complaint that it distributed news articles to its employees without permission of the copyright owners. Similarly, in a media release earlier this year, SIIA announced that it was aggressively fighting graphics content piracy by filing lawsuits against individuals and companies that copied and distributed clip art without appropriate licenses. In another media release, SIIA touted the use of paid whistleblowers to help SIIA find infringers.
The implications are clear: Whether the subject is software, content or any other works of authorship, use and distribute the products only to the extent that you are authorized to do so by the terms of the applicable licenses.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
A Practical Guide to GPL Compliance
I am pleased to make available on this blog’s Downloads page “A Practical Guide to GPL Compliance”, published by the Software Freedom Law Center.
In my opinion, this is a must read for anyone who is preparing or distributing software that is governed by the GPL.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Intellectual Property Essentials for Start-ups
“Intellectual Property Essentials for Start-ups” now is available as a Free Download on the Downloads page.
Here are some of the questions that the document addresses:
- Which types of intellectual property (IP) should a start-up be aware of?
- How can we be sure to own IP created by independent contractors?
- Are there special considerations if the contractor is located overseas?
- It is pretty easy to register a trademark online; where might I go wrong?
- A provisional patent application is inexpensive and can be filed quickly; are there any risks I should keep in mind?
- Money is tight; can we use another company’s form of agreement rather than paying to develop one of our own?
- Open source software is hot; does it bring along any special dangers?
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Alice Doesn’t Work Here Any More
A software company (“Client”) had to dismiss one of its developers (let’s call her “Alice”). The problem was Alice’s incompetence.
But there was a complication: Alice was pregnant. Adding to Client’s frustration, Alice, without permission or advance notice, was taking more time off than she was entitled to. Client wanted to be rid of Alice but did not want to be charged with discrimination based on sex or pregnancy.
Focusing on the Issue
I worked with Client’s CEO and Alice’s manager. We agreed right away to ignore the unauthorized time off. The amount of money at stake was relatively small, and we were concerned that raising time off as an issue could entangle us in Alice’s pregnancy-related medical needs.
If You Think It Smells Bad Now, Wait until You Dig into It
More than 20 years ago, I was General Counsel of a small software company. The CEO – a successful serial entrepreneur – was always looking for opportunities to acquire, or establish strategic relationships with, other companies. The CEO was creative in identifying opportunities, yet highly attuned to potential problems. He told me, “If you think it smells bad now, wait until you dig into it.“ I was recently reminded of his warning.
A client (“Client”) had signed a letter of intent to acquire a much smaller company (“Target”) and asked that I represent Client in the transaction. I sent a Due Diligence Request List to Target, and with its reply I had my first clues that Target might have some problems. Target’s initial responses were superficial and incomplete. I did not know whether the company was being evasive or was merely naive. Either way, it appeared that Target lacked a lawyer’s guidance.
Work Made for Hire – a Term Made for Confusion
As Alexander Pope wrote in An Essay on Criticism (1711), “A little Learning is a dang’rous Thing“. That certainly pertains to the legal concept of a “work made for hire” (WMFH).
People who have some knowledge of WMFH typically believe that it means the transfer of all rights in a work from the creator to a purchaser. So, for example, if an independent contractor writes software for a company, then according to this belief, the company will own all rights to the software if the parties’ contract says the software is a work made for hire. This belief is wrong! The following is an explanation of what work made for hire really means under copyright law and how parties actually can arrange for transfer of all rights in a work.
(more…)
About Dana Shultz
Dana Shultz retired from the practice of law in 2020. As a lawyer, Dana dispensed as much business advice as legal advice. Accordingly, although he no longer is practicing law, Dana occasionally provides consulting services to owners and managers of small businesses and mentoring services to business lawyers.
If you need legal representation, Dana provides referrals to experienced business lawyers.
The remainder of this page is being retained online for archival purposes.
Dana Shultz is a business-savvy attorney with in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.
Dana develops close working relationships with clients based on a positive attitude and rock-solid dependability. He delivers High-touch Legal Services® (about which you may read many Client Testimonials) – thus the name of his blog.
Dana received an undergraduate degree with honors in Communication Sciences from the University of Michigan and a law degree from Boalt Hall School of Law (University of California at Berkeley). He is a member of the State Bar of California. (more…)
