Something crossed my screen today that piqued my interest. That concept is competitive keyword advertising litigation. The case that sparked my curiosity is Fair Isaac Corp v. Experian Information Solutions, Inc., 2009 WL 4263699 (D. Minn. 11/25/2009) (www.jurisnote.com/Cases/fair6411.pdf). For a good analysis of the ruling see Eric Goldman's blog (blog.ericgoldman.org/archives/2009/12/competitive_key.htm). Interestingly, the case law to date on this issue has found for the defendants in most cases, but it makes me wonder about the legal theory, specifically why this isn't more widely explored and if the average entrepreneur is even thinking about this.
The concept, boiled down to very brass tacks, is that the owner of a valid, distinct trademark whose mark is being used by another party for use in competitive keyword advertising that cause confusion to the consumer may have an equitable remedy. This stems from the Lanham Act. There is some question of whether actual confusion is necessary, but it is obviously going to help if one can show actual confusion. Thus, the elements are (1) ownership of a valid, distinct mark; (2) use of that mark by another party; (3) in a manner that is likely to lead to consumer confusion as to the source, sponsorship or affiliation with the mark. Now take those elements and apply them to competitive keyword advertising. So, if I use a mark as a keyword in order to increase my on-line exposure, but do so in such a manner that it creates confusion, I can be liable to the holder of the mark and the remedy is an injunction against my use.
Now, to date, courts have found in favor of the defense, but I can see on the horizon a court that does find confusion. In the Fair Isaacs case, the court discredited the plaintiff's expert (I'd love to know what he said that the court determined lacked credibility and if Fair Isaac's is going to ask for their money back in light of the court's ruling). But, how far away are we from a case in which the Court is persuaded. I think it will only take one or two court rulings before this becomes a more readily available and pursued cause of action. As companies increase their on-line presence and efforts to obtain competitive advantage through mechanisms like keyword search terms, the chances of confusions increase. As those chances increase, the possible success of this type of litigation increases.
The implication to the entrepreneur is that the knowledge of this principle can be useful in an offensive and defensive posture. Offensively, if you have a mark, you need to be vigilant in your oversight of how that mark is being used and if you determine that it is being used by other parties in keyword usage that will confuse consumers, you need to make sure you have your evidence and move quickly for injunctive relief. Defensively, as your business develops its marketing strategy and using keywords you need to be cognizant of the fact that, if you are using a trademarked item, you are doing so in such a way that confusion will not ensue.
Overall, I think that this another example of the potentials in Internet litigation. This is a cause of action that arises, in my humble opinion, only in the technology age. Because search engines allow for large keyword grabs, this type of confusion can (and likely will) arise, and in doing so, infringement and litigation has (and will) also ensue.
Posted Tuesday, December 1, 2009 by
David Castor
New technology businesses usually face two hurdles to get their product to market. The first is proof of concept. The second is proof of scale.
Both are intended to solve the “Ability” stage of the business plan process and move the business into the "Meeting" stage:
Proof of concept is simply the proof that the business can develop a working prototype that solves the market opportunity issue. For a software licensing company this will be development of a bare bones software program, usually without user interface design or additional back end functionality. It solves the most basic questions of whether the contemplated design will meet intended functionality.
Proof of scale is the initial to-market phase that proves the business can scale the technology (or good or service) to satisfy the market opportunity at a profit. Some of the issues to address at this stage include:
After proof of scale is satisfied, a business is usually in a more stable mode with its product (or service) satisfying the market opportunity at a profit.
As an entrepreneurial law / SaaS law attorney, I have helped several clients work through these and many other issues in the “proofs” stages. I find that few business fail to address the proof of concept stage well, but many ignore issues in proof of scale. One of the key issues to address early is quantifiable customer demand for YOUR product as many of the other issues spring from this one.
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Both are intended to solve the “Ability” stage of the business plan process and move the business into the "Meeting" stage:
Recognition of Market -> Recognition of Market Opportunity -> Ability to Meet Market Opportunity -> Meeting Market Opportunity at Profit
Proof of concept is simply the proof that the business can develop a working prototype that solves the market opportunity issue. For a software licensing company this will be development of a bare bones software program, usually without user interface design or additional back end functionality. It solves the most basic questions of whether the contemplated design will meet intended functionality.
Proof of scale is the initial to-market phase that proves the business can scale the technology (or good or service) to satisfy the market opportunity at a profit. Some of the issues to address at this stage include:
- Adequate capital
- Quantifiable customer demand
- Number of sales force required
- Adequate supply chain (in terms of cost, quality and time)
After proof of scale is satisfied, a business is usually in a more stable mode with its product (or service) satisfying the market opportunity at a profit.
As an entrepreneurial law / SaaS law attorney, I have helped several clients work through these and many other issues in the “proofs” stages. I find that few business fail to address the proof of concept stage well, but many ignore issues in proof of scale. One of the key issues to address early is quantifiable customer demand for YOUR product as many of the other issues spring from this one.
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Tuesday, December 1, 2009 by
Janet Croswell
So you've launched your company and hired a web-developer to breathe life into the idea you've poured your heart and soul into developing over the past several months, perhaps even years... Maybe you never even thought to ask the question, but at the end of the day who actually owns "your" website? You or the web designer?
Indiana software litigation in a ruling by the Supreme Court of Indiana, Conwell v. Gray Loon Outdoor Marketing Group, points to the fact that hiring a contractor for the development of content and programming of a website is considered a service rather than a purchase of a good.
In this case, the Indiana Supreme Court ruled that the independent contractor owns the property, while the hiring party owns a non-exclusive and perpetual license to use such property, unless of course, there is an agreement specifying otherwise.
Looking towards prior Indiana technology litigation the Supreme Court applied the definition of an implied non-exclusive license to the development of a website:
An implied non-exclusive license is granted when (i) a person (the licensee) requests the creation of a work; (ii) the creator (the licensor) makes that particular work and delivers it to the licensee; and (iii) the licensor intends that the licensee copy and distribute the work.
This definition applied to the facts surrounding the website development in this particular case ultimately led the court to its conclusion.
So, expect this to be the case (at least in Indiana) the next time you hire a webdesigner for your next project: upon final payment, the webdesigner owns the property, while you own the right to use it... forever.
(Unless, of course, you involve technology legal counsel first and negotiate otherwise.)
For an example of a newly developed Indiana-based website check out: GlobalToaster
Posted Monday, November 23, 2009 by
David Castor
What are your metrics for business success? I attended a non-profit board meeting this past week where the directors were working through this question - "How do we measure success?"
A common metric that was discussed was # of volunteers in the organization in ___ years. Although this metric does measure growth, it does not measure the quality of growth. What if the volunteers are under committed, under trained or just plain lousy at their job? You may meet your metric but find that your organization is under serving the community, or worse, frowned upon by the community it is trying to serve.
Similar metrics are common in business plans where I often see # of customers as a metric for growth. I also saw this problem with the prior administration of Indiana's 21st Century Fund where creation of jobs was the key metric for grant opportunities. The problem there is that there are good jobs and bad jobs - purely measuring # of jobs does not distinguish between the two. I could create tons of hourly pay jobs today if I wanted, but those jobs would be low wage and temporary. Not the type that would ultimately benefit the State. In short, the metric is not a good measure of success.
The difficulty with metrics is that they can come in just about any form you can imagine. They are simply a way to measure growth. The key is to tie them in with the ultimate goals of your organization. Most companies do not want growth at the cost of profitability. Personally, I would rather run a small shop with higher profit than a large shop with smaller or no profit.
So, here are a few poor and good metrics for successful business growth:
Poor metrics:
# of employees
# of customers
# of square feet of office space
Good metrics:
Net Profit at $_____, based on Revenue of _____.
% of customers at ___ % margin
___% profitability margin per employee
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
A common metric that was discussed was # of volunteers in the organization in ___ years. Although this metric does measure growth, it does not measure the quality of growth. What if the volunteers are under committed, under trained or just plain lousy at their job? You may meet your metric but find that your organization is under serving the community, or worse, frowned upon by the community it is trying to serve.
Similar metrics are common in business plans where I often see # of customers as a metric for growth. I also saw this problem with the prior administration of Indiana's 21st Century Fund where creation of jobs was the key metric for grant opportunities. The problem there is that there are good jobs and bad jobs - purely measuring # of jobs does not distinguish between the two. I could create tons of hourly pay jobs today if I wanted, but those jobs would be low wage and temporary. Not the type that would ultimately benefit the State. In short, the metric is not a good measure of success.
The difficulty with metrics is that they can come in just about any form you can imagine. They are simply a way to measure growth. The key is to tie them in with the ultimate goals of your organization. Most companies do not want growth at the cost of profitability. Personally, I would rather run a small shop with higher profit than a large shop with smaller or no profit.
So, here are a few poor and good metrics for successful business growth:
Poor metrics:
# of employees
# of customers
# of square feet of office space
Good metrics:
Net Profit at $_____, based on Revenue of _____.
% of customers at ___ % margin
___% profitability margin per employee
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Friday, November 20, 2009 by
Chris Stephen
As an admitted technophile, I can't help but look into all the newest gizmos and gadgets. Plus, working at an information technology law firm, I can even bill it sometimes. Thus, I've recently begun a fascination with e-books. Jason Wilson has done a very interesting set of blogs looking at the use of e-books (or lack of use) for lawyers (www.jasnwilsn.com/). Jason's viewpoint is as a counterpoint to a recent set of blogs by Professor Eugene Volokh (volokh.com/2009/10/02/the-future-of-books-related-to-the-law/). I find this debate interesting for lawyers in general, but litigators specifically.
While I appreciate Jason's point of the importance of cloud computing and web based interfaces for lawyers, I have to admit that I personally think that e-readers are likely to have increasing presence in courtrooms around the country. I am genuinely intrigued by the thought of turning to my e-reader to "leaf" through a treatise on privacy litigation or ASP law that I've downloaded while sitting in a courtroom. This is particularly true when the courtroom that I'm sitting in is located in small town Indiana (or any other small town) that is still working on integrated computer systems and look at you askew when you ask about WI-fi. Web based interfaces are extremely important to the 21st century attorney, but there are still limitations. And if technology can allow me to carry treatises and law books that I might need before a court while still using my super sleek briefcase, I'm all for it.
While I appreciate Jason's point of the importance of cloud computing and web based interfaces for lawyers, I have to admit that I personally think that e-readers are likely to have increasing presence in courtrooms around the country. I am genuinely intrigued by the thought of turning to my e-reader to "leaf" through a treatise on privacy litigation or ASP law that I've downloaded while sitting in a courtroom. This is particularly true when the courtroom that I'm sitting in is located in small town Indiana (or any other small town) that is still working on integrated computer systems and look at you askew when you ask about WI-fi. Web based interfaces are extremely important to the 21st century attorney, but there are still limitations. And if technology can allow me to carry treatises and law books that I might need before a court while still using my super sleek briefcase, I'm all for it.
Posted Friday, November 20, 2009 by
David Castor
There are several business blogs that I follow. Most of these are written by SaaS law / Internet law clients of mine or other Indiana businesses in technology industries. Lately I have been falling behind on them. This morning I am trying to catch up.
I came across a very good, brief video on Kristian Andersen + Associates' blog.
The video is from the Bigger Ideas/Smaller Indiana conference this past summer. In the video Kristian Andersen shares his feelings on central Indiana's business environment and our tendency to minimize our solid business culture by holding ourselves out as having two strengths to attract businesses and entrepreneurial ventures to Indiana:
#1 - Indiana has low housing costs.
#2 - Indiana is a great place to raise a family.
Don't get me wrong, these are great attributes of our region, but I agree with KA that they do not create cultural excitement or substantive value for businesses. If you look at top tier business environments, they certainly do not market themselves in this way. They sell value. They sell cultural significance. They sell networks and incentives.
Kristian, very nicely done!
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
I came across a very good, brief video on Kristian Andersen + Associates' blog.
The video is from the Bigger Ideas/Smaller Indiana conference this past summer. In the video Kristian Andersen shares his feelings on central Indiana's business environment and our tendency to minimize our solid business culture by holding ourselves out as having two strengths to attract businesses and entrepreneurial ventures to Indiana:
#1 - Indiana has low housing costs.
#2 - Indiana is a great place to raise a family.
Don't get me wrong, these are great attributes of our region, but I agree with KA that they do not create cultural excitement or substantive value for businesses. If you look at top tier business environments, they certainly do not market themselves in this way. They sell value. They sell cultural significance. They sell networks and incentives.
Kristian, very nicely done!
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Tuesday, November 17, 2009 by
Janet Croswell
I saw a great article awhile back in Entrepreneur and thought I should post the article for those in the formation stages of their next business venture.
I can't stress enough how much time and energy it takes to launch a start-up, and just how much the success or failure of a budding new company rests on the people involved. I see it everyday as an Indiana technology lawyer involved in Indiana entrepreneurial law.
You can count on spending hours upon hours of the day with your business partners, so consider who those people are wisely. At the very least, read this article by Scott Gerber, who is a columnist for Entrepreneur.com's Young Entrepreneur and the CEO of Gerber Entertainment.
Partnerships can turn out to be a blessing or a curse. For every thriving partnership featured in Entrepreneur, there are thousands that end up stagnant, dissolving, dysfunctional or worse--in court. More often than not, performing basic due diligence can keep you from ending up in bad partnerships. So, have you done your homework? Are you ready to trust your financial security on someone else’s personality, work ethic and business acumen? Before you drink the partner Kool-Aid, here is a list of the top ten worst business partners for your start-up--along with some tips to help you avoid this cast of characters:
- Mr. Employee
Mr. Employee is a first-time entrepreneur with a pristine resume and an abundance of references. He enjoys collecting a weekly paycheck, health benefits, and eating dinner with his family nightly at 7 p.m. Unfortunately, Mr. Employee isn’t really self-sufficient and doesn’t know how to move the business forward without you instructing his every move. Plus if your investment deal doesn’t pan out soon he is going to need to find a “real job” to pay the kids’ college tuition. Tip: Risk-adverse individuals who do not share your priorities will not be productive partners. Pass up individuals who cannot commit equal time, energy and financial resources. - Mr. Perfectionist (also known as Mr. Procrastinator)
Mr. Perfectionist needs every “i” to be dotted and “t” to be crossed before he schedules an official product launch date. He enjoys researching competitors, building industry case studies and improving his 150-page business plan. Mr. Perfectionist really wanted the new business to be up-and-running by now, but still feels something isn’t quite right. He plans on putting together another comprehensive survey to send to all of his colleagues, friends and family in the next few weeks to help flesh out the concept further. Tip: A good plan today is always better than a perfect plan tomorrow. Steer clear of excuse-prone procrastinators. Seek out self-starters who run with the ball and make things happen. - Mr. College Buddy
Mr. College Buddy had a stroke of genius while out at the bar one night, wrote it on a cocktail napkin and asked you to help him “make it happen”. He enjoys bragging about his great idea and giving you directions on how to execute (he’s not into the “heavy lifting” thing). The issue: he’s moving across country to start med school in the Fall. But fear not, Mr. College Buddy will make himself available by phone when he’s not studying, working, in class or on a date. He’ll be sure to forward you the address where you can mail his 50% of the profits. Tip: Never assume all of the risk in exchange for half the reward. Ideas are worthless without proper execution. Before you bring a co-conceived idea to fruition, make certain that your partner plans to be around for the long-run. Napkins are not legally binding. Always execute an operating agreement. - Mr. Inventor
Mr. Inventor thinks he’s created the next billion-dollar widget. He enjoys giving two-hour dissertations on Chinese electrical engineering standards to investors and making business decisions based on ‘nice people’ and ‘gut feelings’. Mr. Inventor doesn’t really understand the phrase ‘in the black’, but feels it’s imperative to spend all of the company’s investment proceeds on research and development. Tip: Brilliant academics are not necessarily brilliant businessmen. In lieu of a partnership, first consider licensing deals or strategic partnerships. If you decide to go ahead with a partnership, be sure your agreements clearly distinguish the differences between product control and operational control. - Mr. Right
Mr. Right will be the first person to tell you that he is never wrong. His favorite phrase is ‘my way or the highway’. He will rarely discuss his decision making process because he views such discussions as a weakness. He enjoys demeaning partners who don’t agree with him and making decisions without telling them. Funny thing about Mr. Right: he always seems to blame everyone but himself when his plans don’t pan out. Tip: Communication is the key to a successful partnership. Find a collaborator, not a dictator. No one is always right. - Mr. Dreamer
You’ll hear Mr. Dreamer say this line a lot: “One day, when we’re millionaires…” He loves talking about retiring by 29 and how he intends to spend his hypothetical millions on a gold plated yacht that he’ll dock off the coast of his private island. One small problem with Mr. Dreamer: he doesn’t seem to know how to keep the business above water next month. Tip: Big paydays come from years of hard work and persistence, not excessive rambling and daydreaming. While it’s important your partner be both positive and optimistic, it is equally important that he or she is grounded and focused. - Mr. Spender
Mr. Spender can’t possibly survive without a six-figure salary, lavish office and an in-house cigar roller. Price is no object when it comes to entertaining a client or flying first class. If you’re lucky, Mr. Spender might even invite you to one of the extravagant dinner meetings that he charges on your company’s corporate card. Tip: There is no such thing as the unlimited checkbook. Partner with fiscally conservative, financially responsible individuals who strive to make every dollar benefit company growth and development--not their personal lifestyles. - Mr. CEO
Mr. CEO feels compelled to tell everyone that he is a CEO within 30 seconds of meeting him--even if his company is worth less than the paper on which his business card is printed. He loves cocktail receptions, his name written in fancy fonts, and stacks of luxury car magazines neatly piled on a coffee table in plain sight of customers. The only thing he doesn’t seem to like: real work. Tip: Successful companies are not built on titles, talking and toys. Keep away from selfish, egotistical individuals who want to talk the talk versus walk the walk. - Mr. Vacation
I’d tell you more about Mr. Vacation, but I don’t know much about him. He never seems to be around. Tip: No-shows are dead weight and eat away profits. Make sure that your operating agreement clearly outlines partner responsibilities and vacation days.
And the partner to avoid like the plague is… - Mr. Personal Issues
Mr. Personal Issues always has a sad story. On the same day as your company’s keynote presentation at the big conference, his son’s wisdom teeth need to be pulled and his dog died of pneumonia. He would love to attend next week’s investor meeting, but his divorce hearing might tie him up all day. Unfortunately, Mr. Personal Issues can’t afford his legal bills, so he’ll need to pull a little more money out of the company this month to avoid his ex-wife from taking 50% of his equity in the settlement. Thankfully, this will be the last time he needs money… Tip: You’re not in business to be a babysitter or a psychiatrist. Know everything there is to know about a prospective partner before you sign on the dotted line. Discuss everything from business to politics to family life to finances. If a potential partner seems to have a few screws loose, run as fast as you can in the other direction.
Posted Monday, November 16, 2009 by
Janet Croswell
Here at Alerding Castor Hewitt, LLP, often times we work with clients who have software that inherently transcends state and national borders. Not just brick and mortor storefronts, many of our clients have customers nationwide and around the world.
Such is the realm of cloud computing law, and it's up to us as technology legal counsel to answer the inescapable question of what state, federal, or even country's law applies should a lawsuit arise.
Well, if you haven't contracted for this simple jurisdictional provision specifically in the terms of your license agreement or software service level agreement, as a SaaS company you may just find yourself flying over to London someday to deal with a breach of contract under U.K. law and their interpretation of your agreement.
All I have to say is good luck, and I hope you are prepared for those Barristers' premium legal rates.
Even if you win your case, you just wasted a tremendous amount of valuable time and money unnecessarily on SaaS litigation in the "wrong" venue.
I'm all for making the deal, but before you go shaking hands and rolling out your new Software as a Service application with a form agreement and without proper advisement, be sure to consult with reliable technology counsel to help you draft a solid agreement for your company's SaaS product.
Posted Monday, November 16, 2009 by
David Castor
The following post by Pat Horgan of Palidan Associates was printed on the E-Sourcing Forum a couple of weeks ago. Even though the post applies particularly to sourcing professionals, the concepts are excellent for most contract negotiations.NEGOTIATING TIPS
Contract Document Control
In contract development, the party that controls the physical production of the contract document and the wording changes during negotiations generally has a distinct advantage. This is particularly true in long or complex contracts.
Subtle or undetected changes can possibly be introduced into the document by the “controller”, but without the other party’s knowledge. Sometimes seemingly innocuous, but subsequently important terms and conditions on someone else’s paper can escape notice. To the extent that one party’s language is used, subsequent legal interpretation of precedent, meaning, or industry practice may favor that party.
The party that controls the contract document has a leg up in the negotiations.
Controlling Terms and Condition
Similarly, both the Buyer and the Seller have to be careful that they are not inadvertently accepting unknown or non-negotiated terms and conditions that may exist on the other party’s standard paper, contract documents, invoices, or purchase orders. Often terms and conditions on a Seller’s standard invoice are different than those on the Buyer’s standard purchase order, and both may differ from specific contract language. Often, simply paying an invoice means the buyer has “accepted” the Seller’s terms. In a more recent complication, agreements may refer to Terms and Conditions that reside on the Seller’s website. This is sometimes difficult to manage because the website can be readily changed, enabling the Seller to change prices and terms at their discretion.
Often the Buyer firm, or the larger firm, or the firm that has better legal representation wins this negotiating element without the other party even realizing the issues involved.
Some things Buyer’s can do:
Buyer’s can generally insist that contracts be written on their paper, that they control and modify the physical document during negotiations, and that their terms and conditions prevail. Include terms and conditions early in the RFX process to identify and address these issues at the point of greatest leverage. Vendor invoices should always be reviewed, matched against purchase orders and/or contracts, and checked for inappropriate terms or conditions. Suspect invoices can be referred to properly trained Accounts Payable personnel or legal counsel for resolution.
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Friday, November 13, 2009 by
David Castor
According to a recent Gartner research report, worldwide SaaS revenues are expected to grow 18 percent in 2009 to reach $7.5 billion. The report further stated an expectation for SaaS industries through 2013 when worldwide revenues are expected to top $14 billion for enterprise application markets.Gartner listed the top SaaS market segments for 2009 as follows:
1. Content, Communications and Collaboration (CCC) - $2.6 billion
2. Customer Relationship Management (CRM) - $2.3 billion
3. Enterprise Resource Planning (ERP) - $1.2 billion
4. Supply Chain Management (SCM) - $826 million
5. Office Suites - $68 million
6. Digital Content Creation (DCC) - $62 million
7. Other SaaS offerings - $472 million
2. Customer Relationship Management (CRM) - $2.3 billion
3. Enterprise Resource Planning (ERP) - $1.2 billion
4. Supply Chain Management (SCM) - $826 million
5. Office Suites - $68 million
6. Digital Content Creation (DCC) - $62 million
7. Other SaaS offerings - $472 million
My business law / Internet law practice focuses on representing technology businesses as general counsel through their business lifecycle. A number of my clients that are seeing rapid growth are in SaaS markets, primarily in CCC, CRM, and SCM markets. This report is encouraging news for SaaS businesses in Indianapolis.
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Tuesday, November 10, 2009 by
David Castor
From time to time I use the term “From a 10,000 foot view…”. This is corporate buzz speak for taking a broad look at something without getting into the details. From a business vision and strategy perspective, it is common to start at a high and broad perspective and then work down to the details (i.e., "into the weeds").Many business professors, and even our President, encourage business executives to stop using such buzz phrases as they can serve as a crutch for intelligent decision making and implementation.
"These are all words and phrases that dumb people use to sound smart. It's ludicrous. I mean, if you are in a meeting and you say ‘From a 30,000 foot view, this looks like a great idea’, aren't you just saying that you are too stupid to look at the details of the proposal to figure out if it will actually work? Your employees lose all respect for you. That's why when I take my chair in the Oval Office, one of my first orders of business will be to outlaw these inane words and phrases."
- President Obama
I understand the President's point, but personally I still like this phrase as long as it is not overused and used properly.
So I use “10,000 feet”. Obama refers to 30,000 feet. In the last week I heard one business professional say “30,000 feet” and another business owner say “50,000 feet”.
So, what is the proper “foot view” for high level, summary reviews of situations?
The good news for anyone using the phrase is that it is mere corporate buzz. So, there is a plenty of leeway on proper phrase usage. Not the a Google search is the proper way to determine correct phrase usage, but for sake of time I ran a Google search. It shows various results for each phrase height, with each search showing articles by businesses professionals, organizations, politicians, and academics using each height. That really is not an answer, but it at least shows that I am not alone in my club. I am sticking with 10,000 feet!
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Monday, November 2, 2009 by
David Castor
I have helped a number of clients pursue and secure capital funding from private equity investors. For all clients in this process I tell them to approach potential investors as they would potential customers. Investors come in all types. Learn as much as you can about the individual, angel investor group or private equity fund before presenting to them; then present to them the information that they want to hear (not falsely, but approach investors on their ground, not yours). A few weeks ago I saw a presentation by a couple of young entrepreneurs looking to secure additional capital for their company. Their company developed a SaaS application that is used as a logistics tool within other businesses. It is purely a plug in product for a business customer's cost center.
I had never thought of this before, but for software licensing and SaaS model businesses it seems that there is a big difference, at least from potential investors’ perspectives, between B2B SaaS applications which are tailored for profit centers and those for cost centers. Tools designed for profit centers are much easier to sell to investors. You show that if a customer utilizes the tool, they can generate an ROI which will lead to a certain profit increase. For cost center tools, about the best you can do is show that the tool generates so much operational efficiency that it ultimately frees up resources to generate more profit in other areas. For obvious reasons I think this is a harder sell to investors who generally want to see direct ROI.
I will write more about this topic in the future as I work this concept.
Posted Thursday, October 29, 2009 by
David Castor
Emerging Indiana technology companies should consider grant opportunities as an alternative to raising private equity. The benefits are obvious as you are not giving up a stake in the business in order to secure strategic capital. A client of mine this past week engaged my technology law firm to assist in an SBIR grant opportunity. Other grant opportunities include NIH grants and 21st Century Fund grants.
The 21st Century Fund is a "must" to consider if you are an Indiana technology business. The Fund is described on its website:
The Indiana 21st Century Research and Technology Fund was created in 1999 by the General Assembly to stimulate the process of diversifying the State's economy by developing and commercializing advanced technologies in Indiana. The Fund is now an integral element of the Indiana Economic Development Corporation's Small Business and Entrepreneurship Division. 21st Century.
Posted Saturday, October 24, 2009 by
David Castor
I had the honor of speaking at the Masters of Business Online conference this last week. The conference was organized by Jim Brown of EverEffect. Jim and his team did a great job with the event. Last count I heard was approximately 250 in attendance.Here are a few blog posts that described the event:
Marketing Technology Blog by Doug Karr
Social Media Blog by Kyle Lacy
Silver Square Blog by Raquel Richardson
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Thursday, October 22, 2009 by
David Castor
When presenting to an angel investor group or private equity investors, two rules of thumb should be followed:1. The investment opportunity should be easy to understand (Focus on the investment opportunity, the market opportunity and why this particular management team can pull this off).
2. Know your numbers and your assumptions.
I read a business plan this past week that segmented cash flow projections into four options, each with a weighted probability of occurrence. They were referred to as Strike Out, Base Hit, Home Run and Grand Slam. For example, Strike Out means the business tanks – this was assigned a 5% probability. Base Hit was a conservative projection – assigned a 45% probability. Home Run was a more aggressive projection – assigned 40% probability. Grand Slam was a highly aggressive projection – assigned a 10% probability.
There are a few problems with this. Where did the probability stats come from? It appears they were pulled out of thin air. There were no assumptions stated that the reader could rely on. All projections have assumptions. Make sure to state them. Sophisticated investors will be looking for them.
Posted Wednesday, October 21, 2009 by
David Castor
I am speaking this afternoon at the MBO Conference on the Legal Landscape of Corporate Blogging. It was an honor to be invited to participate in this year's conference, and I am truly looking forward to the time.As an Indiana technology lawyer I monitor areas of law that impact my clients' business worlds. My colleagues and I monitor Internet laws, privacy laws, ASP law, SaaS law, cloud computing law, and various other areas of business law to best advise our clients on how to navigate the legal landscape of emerging technology fields. Blogging law is the topic for today's talk.
We will be covering areas such as copyright infringement, defamation claims, privacy laws and Section 230 protections. We will also address the recent FTC Guidelines on endorsements by bloggers.
This should be an interesting discussion.
Posted Wednesday, October 14, 2009 by
Chris Stephen
WIth the FTC guideline debate firing up the information technology law debates, Eric Goldman had an interesting post on Monday about the possiblity of 47 U.S.C. 230 preempting at least a portion of the guidelines. Here is the text of his post (found at his Technology & Marketing Law blog):
My Comments
If this interpretation is correct, which I think it is, the implications for business law and the technology lawyers is that an other level of insulation will protect entrepeneurs who are interested in using word of mouth blogging campaigns. Protection from liabliity under 47 USC 230 is one of the biggest protections afforded to litigants. The obvious question that I think this poses is: If the FTC is trying to get around 47 USC 230, and is likely going to be unsucessful, how long will the protection of 230 be available before Congress removes it? Of course, these types of questions are why I love being a technology lawyer.
"Last week’s release of the FTC's new Endorsement and Testimonial Guidelines has generated a significant amount of angst online. The resulting commentary has been strongly and almost uniformly negative. Frankly, none of the sources I read have praised the guidelines, but perhaps I'm locked in an echo chamber. Declan has a useful recap/linkwrap.
In this environment of heightened negativity, people have been searching for angles to prove the FTC can't do what it's doing. This has led folks to my post from last week arguing that certain facets of the guidelines violate 47 USC 230.
Despite the general popularity of the post, privately it has attracted some skepticism. Several smart law professors/lawyers disagreed with my post in Facebook profile page comments, and I've gotten some private emails to the same effect. What’s caught my attention is that these disagreements are coming from folks who normally agree with my expansive 230 interpretations. This clearly indicated to me that 230’s application to the FTC’s scenario was not nearly as self-evident as I thought it was.
As a result, in this post, I'm going to describe my analysis in more detail than my previous post. I'm not sure I'll convince the doubters, but they deserve more detail than I initially provided.
The FTC's Example
There are many facets to the new guidelines, but I am focusing solely on Example #5 to §255.1, which reads:
Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. [my emphasis]
The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services. [See § 255.5.]
In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.
The FTC doesn't define what qualifies as a "blog advertising service," but it's fairly clear the FTC is targeting PayPerPost/Izea and its competition. So the example could be restated as:
* advertiser contracts with PayPerPost to get bloggers to write about its product
* PayPerPost makes a match with a blogger. There is no employment or agency relationship between the advertiser or the blogger; this is an ordinary customer-vendor relationship, mediated by PayPerPost
* without any pre-review or kibitzing by the advertiser, the blogger makes a truthful statement about the blogger's experience about the product, but the statement would be impermissible marketing if made by the advertiser
* the FTC treats the advertiser as having made the blogger's statement
Prima Facie Elements of a 47 USC 230 Defense
47 USC 230(c)(1) reads:
No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.
A successful 230(c)(1) defense breaks down into three prima facie elements:
1) the defendant must be a "provider or user of an interactive computer service"
2) the content generating the alleged liability must be "information provided by another information content provider"
3) the legal claim has to treat the defendant as the "publisher or speaker" of the third party content
230 has a number of statutory exclusions, but I don't think any of them are relevant to Example 5.
Application of 47 USC 230 to Example #5
With this in mind, the FTC's Example #5 satisfies the prima facie elements of a successful 230 defense as follows: the advertiser is the user of an interactive computer service, the blog post is content provided by another information content provider, and the FTC's theory that the advertiser adopts or endorses the blog post treats the advertiser as the publisher or speaker of the third party blogger's blog post.
I received significant skepticism about my characterization of the advertiser as the "user" of an interactive computer service. I can reach this conclusion in two ways. First, PayPerPost provides an interactive computer service, and the advertiser uses PayPerPost. Second, the advertiser is a "user" of some Internet connectivity provider just by getting online.
Admittedly, explanation #2 is expansive, perhaps disconcertingly so. By this reasoning, anyone online automatically qualifies as a "user" of an interactive computer service by definition, thus seemingly expanding the 230 immunization eligibility to everyone without restriction. While this may sound wrong, it’s entirely consistent with how courts have interpreted the term “user.” The leading case on the topic, the California Supreme Court opinion in Barrett v. Rosenthal, never provides a single crisp definition of "user" but seemed to contemplate that merely being online qualified. Some minor cases possibly read "user" more narrowly, but I think the dominant line of cases gives “user” an expansive definition.
From a doctrinal standpoint, I think the broad reading of 230's application makes a lot of sense. The cases over the past 13+ years have taught us that 230(c)(1) can be distilled into a simple syllogism: unless the plaintiff’s claim fits into one of the statutory exclusions (IP, federal crimes, ECPA), A isn't liable for third party B's online content or actions. Period.
In the FTC’s Example #5, A is the advertiser and B is the blogger. Applying the same syllogism as above, the advertiser can’t liable for the blogger's online content or actions. Period.
The fact that the advertiser paid the blogger to write the content doesn't change my analysis one bit. For example, in the 1998 Blumenthal v. Drudge case, AOL got a 230 defense for Matthew Drudge's allegedly defamatory content, even though AOL paid $3,000 a month for Drudge's columns and retained editorial control over the content. I'm pretty sure 230 has applied in other cases where the defendant paid for the content. If you can think of others, I’d appreciate the reminder.
Further, the payment doesn't create a respondeat superior relationship between the advertiser and blogger. There is no credible argument that the blogger is the advertiser’s employee. I don’t think the example indicates an agency relationship because the advertiser lacks the requisite control over the blogger. PayPerPost’s mediation of the advertiser-blogger relationship further reinforces the lack of agency; indeed, the advertiser may not even be communicating directly with the blogger. And even if the blogger were the advertiser’s employee or agent, 230 still might apply for the blogger’s statements that exceed the advertiser’s authorization. See Delfino v. Agilent and the Higher Balance case.
If you don't like the broad reading of "users" (even though I think it is defensible under the case law), then go back to my first explanation that both the advertiser and blogger are "users" of the interactive computer service provided by the blog advertising service provider (e.g., PayPerPost). This argument works just fine too.
Applicable 230 Precedent
Unfortunately, I can’t point to many 230 cases applying the immunization to circumstances where the defendant did not host or republish the allegedly tortious content. Most 230 cases involve a provider's liability for its user's content or actions (the “paradigmatic” 230 case).
In contrast, we don't see many cases interpreting the user defense, but then again, those lawsuits may be so tenuous anyway that they are rarely brought. For example, I could not find any specific cases applying 230 to the linking situation I critiqued in my SEC comments.
Even without any obvious precedent, I think the statute on its face leads easily to the conclusion that advertisers can't be liable for bloggers' independent posts. As I indicated in my initial post, I don't even see that as a close case under 230.
One reasonably close precedent, the Subway v. Quiznos case, hasn’t reached a solid 230 ruling yet. In that case, Quiznos reposted some user-created advertising videos, and Subway contended that the videos constituted false advertising. The court rejected Quiznos' 230 defense solely on the grounds that it was raised in a 12(b)(6) motion to dismiss, which the court said was too early. (This same issue arose in Barnes v. Yahoo, where the Ninth Circuit initially agreed with this court and then withdrew that portion of its opinion). Although 230 didn’t apply at the 12(b)(6) stage, could Quiznos claim 230 for the videos at a later stage of the proceeding? I think it can, even if it "adopted" the user-generated videos by republishing them, unless it actually authored the statements that are deemed false advertising. For examples where a republisher can claim 230 for content is putatively “endorses” through its republication, see, e.g., the Barrett case, the Batzel case, the Tefft case (one of the minor cases narrowly interpreting “user”), the D’Alonzo case and the Furber case. I’m sure I could find others.
I think the FTC's Example #5 is an even easier 230 case than Quiznos’ situation. Unlike Quiznos, the advertiser in Example #5 never republished the blog post or even signaled any adoption of or agreement with the post. With such a tenuous relationship between the advertiser and the blogger, the FTC’s overreaching—and the role 230 plays in preventing that overreaching—is even clearer.
Conclusion
As the old expression goes, when you’re a hammer, everything looks like a nail. So perhaps I’m just such a 230 enthusiast that I’m finding it in places it doesn’t belong.
However, having read many dozen 230 cases over the past 13 years, I’ve formed the strong opinion that courts treat 230 as saying A isn’t liable for third party B’s online content. If you accept that proposition (and resist the temptation to manufacture provisos and qualifications that don’t actually exist in the cases), then it should be clear why 230 preempts Example #5—because that’s exactly what the FTC is trying to do."
My Comments
If this interpretation is correct, which I think it is, the implications for business law and the technology lawyers is that an other level of insulation will protect entrepeneurs who are interested in using word of mouth blogging campaigns. Protection from liabliity under 47 USC 230 is one of the biggest protections afforded to litigants. The obvious question that I think this poses is: If the FTC is trying to get around 47 USC 230, and is likely going to be unsucessful, how long will the protection of 230 be available before Congress removes it? Of course, these types of questions are why I love being a technology lawyer.
Posted Tuesday, October 13, 2009 by
David Castor
I had a meeting with an Indiana technology client this week who is interested in pursuing US private equity funding for a roll out of a new SaaS product (actually a 7 year old successful software product converted to a new SaaS model). The capital will be used primarily for additional sales staff with a small portion being used to hire an additional developer.I am always happy with this structure – focus investors’ money on revenue generating activities rather than product development. I see many early stage companies prepare for a capital raise which is only intended to cover product development. There is nothing necessarily wrong there, but it may not be the best approach.
Think about getting the product to market, not just getting it done. Companies that pursue capital from private equity investors to only cover product development often end up with a great product in hand but no resources to get the product to market. The idea that if we build it customers will come is a myth.
Savvy private equity investors will see this as a weakness in a business plan. You have to know your “to market” strategy.
Posted Monday, October 12, 2009 by
David Castor
This is the second part of a four part series from the SpendMatters blog on the rise of Iasta as a global leader in eSourcing markets. The article is by Jason Busch, a Founder and Managing Director of Azul Partners, a boutique advisory firm. He is also Editor of the highly trafficked sourcing, trade and supply chain blog www.spendmatters.com. Jason is regarded as one of the leading technology pundits and thought leaders in the trade, procurement and operations worlds.I recently just completed Ronald Cohen's book, The Second Bounce of the Ball (hat-tip: Greg Mark). The book is a great study in what it takes to be a successful entrepreneur. Perhaps most important in this regard is being able to read what Cohen refers to as the "the second bounce of the ball". After all, when we enter a market for the first time, it's easy to anticipate initial demand, interest, expectations, etc. But after the ball bounces a second time -- as it always does -- it's not always as clear which direction things will go in. Iasta is one of those companies that successfully read not only the second bounce of the ball, but the third as well. After migrating successfully from being a low-cost full service auction provider into a SaaS vendor with a strong e-sourcing mousetrap, they've once again listened to and read the market, moving in a new but logical direction.
Iasta's latest foray is into the world of what I'll term value-added sourcing and procurement services. Relatively speaking they're not breaking any new ground here. But just as they did in the past, they're copying and adapting an existing business model and delighting customers with both their price points and level of service. And they're doing so successfully, down to working with customers on broad- scale procurement transformations. Yes, you read that correctly. Iasta, that niche Indianapolis sourcing vendor, is competing against the Accentures and AT Kearneys of the world in the area of procurement transformation. And they're doing so successfully.
One of the secrets of their model is maintaining a relatively small full-time consulting team. In fact, nearly all of their team members are contractors with excellent reputations from past roles as consultants at major firms. Iasta is giving them far more autonomy and marking up their services significantly less than what other firms tend to do (e.g., I spoke with one of their procurement transformation leads with significant Big 5 experience who had also worked as a contractor for Denali and Accenture doing similar engagements). With Iasta, he was able to take home a significantly larger percentage of the overall client billings for his time and was also able to save the client material amounts over what bigger name firms would have charged (most likely to put in place more junior resources).
But what class of new services is Iasta offering specifically? For one, they're looking to define and bring to market offerings that, in their words, can help "new customers who aren't in a position to successfully use our software for 12 months until we can get them up to speed". If this requires dropping in more senior team members to drive initiatives in almost an interim management capacity, they'll do it. They'll also do more traditional opportunity and organizational assessments and follow through with customized programs designed to bring companies up to the next level of maturity (interestingly on this note, a number of other services providers in the market use Iasta as their sourcing platform and I suspect they might begin to see Iasta as potentially competitive -- the same problem that Ariba has had with its channel partners in the sourcing area).
In addition to procurement transformation offerings, Iasta is embracing the term "cloud sourcing" to describe a range of other services they bring to bear. These include what they're calling strategic initiatives in the form of energy sourcing and management, green supply chain consulting, MRO transformation and procurement outsourcing. But they're also productizing other cost reduction services based around what they're terming Zero Budget impact programs. These are, in Iasta's words, "8 indirect categories that are difficult to source and are not conducive to auctions".
Zero Budget categories include pharmacy benefits sourcing (delivered via a coalition / GPO model) which delivers, on average, 8-10% savings). They also include non-medical benefits and telecom (both delivered via sourcing events with 7-22% and 15-30% average savings respectively). Other categories that fall under this umbrella include software contracting, MRO/safety supplies, print, fuel management and relocation services.
Iasta has not abandoned more discrete service programs in the least, however. They continue to deliver what they term "tactical sourcing" programs in the form of spend analysis services, sourcing services, optimization services and user training. They're also offering spend analysis as service (including data classification, report and spend assessment surveys), fully managed source services, and staff augmentation around category-specific opportunities. To deliver all of these capabilities, Iasta is leveraging a network of "some 100 consultants" many of whom bring either specific category experience (e.g., print) or other areas of expertise.
Stay tuned for additional analysis of Iasta -- including software enhancements and pricing trends / observations / levels -- as this series continues.
Iasta's latest foray is into the world of what I'll term value-added sourcing and procurement services. Relatively speaking they're not breaking any new ground here. But just as they did in the past, they're copying and adapting an existing business model and delighting customers with both their price points and level of service. And they're doing so successfully, down to working with customers on broad- scale procurement transformations. Yes, you read that correctly. Iasta, that niche Indianapolis sourcing vendor, is competing against the Accentures and AT Kearneys of the world in the area of procurement transformation. And they're doing so successfully.
One of the secrets of their model is maintaining a relatively small full-time consulting team. In fact, nearly all of their team members are contractors with excellent reputations from past roles as consultants at major firms. Iasta is giving them far more autonomy and marking up their services significantly less than what other firms tend to do (e.g., I spoke with one of their procurement transformation leads with significant Big 5 experience who had also worked as a contractor for Denali and Accenture doing similar engagements). With Iasta, he was able to take home a significantly larger percentage of the overall client billings for his time and was also able to save the client material amounts over what bigger name firms would have charged (most likely to put in place more junior resources).
But what class of new services is Iasta offering specifically? For one, they're looking to define and bring to market offerings that, in their words, can help "new customers who aren't in a position to successfully use our software for 12 months until we can get them up to speed". If this requires dropping in more senior team members to drive initiatives in almost an interim management capacity, they'll do it. They'll also do more traditional opportunity and organizational assessments and follow through with customized programs designed to bring companies up to the next level of maturity (interestingly on this note, a number of other services providers in the market use Iasta as their sourcing platform and I suspect they might begin to see Iasta as potentially competitive -- the same problem that Ariba has had with its channel partners in the sourcing area).
In addition to procurement transformation offerings, Iasta is embracing the term "cloud sourcing" to describe a range of other services they bring to bear. These include what they're calling strategic initiatives in the form of energy sourcing and management, green supply chain consulting, MRO transformation and procurement outsourcing. But they're also productizing other cost reduction services based around what they're terming Zero Budget impact programs. These are, in Iasta's words, "8 indirect categories that are difficult to source and are not conducive to auctions".
Zero Budget categories include pharmacy benefits sourcing (delivered via a coalition / GPO model) which delivers, on average, 8-10% savings). They also include non-medical benefits and telecom (both delivered via sourcing events with 7-22% and 15-30% average savings respectively). Other categories that fall under this umbrella include software contracting, MRO/safety supplies, print, fuel management and relocation services.
Iasta has not abandoned more discrete service programs in the least, however. They continue to deliver what they term "tactical sourcing" programs in the form of spend analysis services, sourcing services, optimization services and user training. They're also offering spend analysis as service (including data classification, report and spend assessment surveys), fully managed source services, and staff augmentation around category-specific opportunities. To deliver all of these capabilities, Iasta is leveraging a network of "some 100 consultants" many of whom bring either specific category experience (e.g., print) or other areas of expertise.
Stay tuned for additional analysis of Iasta -- including software enhancements and pricing trends / observations / levels -- as this series continues.
Iasta is a software and global service provider of cost effective Supply Management solutions. As a leader in On Demand / SaaS eSourcing software and services, they have helped companies of all sizes and locations make better purchasing decisions. Iasta provides sourcing software for companies who want to analyze, source and optimize business decisions. Companies use Iasta’s product platforms to automate their strategic sourcing processes and provide buyers with the ability to collect and analyze a wide range of supplier or corporate information. Led by a team of talented individuals with experience in building viable companies, the leadership team's expertise and enthusiasm drive Iasta's superior product and service performance.
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See Also:
SaaS Law - Iasta Morphs And Grows Part I
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Alerding Castor Hewitt, LLP is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, and business and Internet litigation.
Posted Tuesday, October 6, 2009 by
Chris Stephen
The Federal Trade Commission has published its Final Guide Concerning the Use of Endorsement and Testimonial in Advertising (16 C.F.R. Part 255) (link to notice-www.ftc.gov/opa/2009/10/endortest.shtm). This Guide addresses in detail the use of blogging endorsements for products. Under the new Guide, bloggers will be required to disclose the material connection they share with the seller of a product or services. These guides are not law, but are rather administrative interpretations of law to assist advertisers with compliance with the Federal Trade Commission Act. That being said, Court will certainly consider them as persuasive authority, so businesses need to be aware of them.
The implications from a information technology law or entrepreneurial law perspective is pretty profound. Blogging has always been the last bastion of free speech where anyone can put forward their ideas, impressions, and opinions without reprisal (with the exception of being forced to endure some flaming if your posts are outlandish). This included a wonderful opportunity for word of mouth advertising campaigns, that are really just now starting to come into their own. But now, that freedom is curtailed slightly. It also represents an increasing involvment of the government in the Internet.
Personally, I think this position by the FTC is good. It is important for bloggers to disclose if they are compensated for their opinions and endorsements. Consumers should have full information when making their decisions. The impacts on businesses, however, will be significant. Both businesses that blog themselves and businesses that utilize blogging as an advertising tool will be affected.
One aspect of this Guide that I find most intriguing are statements to the effect that advertisers may be liable for the statements made by paid endorsers on blogs. These statements are related to Commission prosecution of claims, but, from a technology counsel standpoint, these statements could open the door to increased product liability or breach of warranty litigation from on-line statements. Increases in this type of litigation may have impact on court's opinions related to Section 230.
The Guide is now out there with an effective date of December 1, 2009. Be aware and good blogging.
The implications from a information technology law or entrepreneurial law perspective is pretty profound. Blogging has always been the last bastion of free speech where anyone can put forward their ideas, impressions, and opinions without reprisal (with the exception of being forced to endure some flaming if your posts are outlandish). This included a wonderful opportunity for word of mouth advertising campaigns, that are really just now starting to come into their own. But now, that freedom is curtailed slightly. It also represents an increasing involvment of the government in the Internet.
Personally, I think this position by the FTC is good. It is important for bloggers to disclose if they are compensated for their opinions and endorsements. Consumers should have full information when making their decisions. The impacts on businesses, however, will be significant. Both businesses that blog themselves and businesses that utilize blogging as an advertising tool will be affected.
One aspect of this Guide that I find most intriguing are statements to the effect that advertisers may be liable for the statements made by paid endorsers on blogs. These statements are related to Commission prosecution of claims, but, from a technology counsel standpoint, these statements could open the door to increased product liability or breach of warranty litigation from on-line statements. Increases in this type of litigation may have impact on court's opinions related to Section 230.
The Guide is now out there with an effective date of December 1, 2009. Be aware and good blogging.
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