Indiana Technology Legal Counsel

Memo from Uncle Sam: Die Hard 4 wasn't all that impossible; let us help you

Monday, August 30, 2010 by Chris Stephen

Another post that doesn't quite fit neatly into Indiana Internet litigation or privacy law, but that intrigues me. BusinessWeek, passing along a Tim Greene article from NetworkWorld (found here: www.networkworld.com/nwlookup.jsp), is reporting that the U.S. military has issued an essay in which it urges its expertise in defense be put to use in protecting civilian networked infrastructure, such as power grids, financial institutions, etc. The essay from Foreign Affairs sets out the concept that our military networks are probed and scanned by outside sources millions of time a day by enemies looking for weakness and access. The Pentagon fears that the civilian cyberstructure could also be at risk from cyber-terrorism and that the U.S. military can help by using its tools to protect those necessary networks.

This concept imposes a sense of fear and foreboding in your friendly neighborhood technology legal counsel. On one hand, I can recognize the importance of protecting those networks. If Bruce Willis and Justin Long taught us nothing, it is that a "fire sale" can cripple this country (and big props to Kevin Smith for his part in that flick). Other than our Amish citizens, we, as a people, rely so heavily on our networks that we need to protect them. However, the idea of the government and military putting their hands into the inner workings of those civilian networks also scares the heck out of me. There are too many "technology deciding it knows what's best for us" movies for me to not worry about increased presence of government and military in our cyberworld.

I guess, the reality is that I have no answer to this issue, but I thought it was interesting. Like many of the questions we see arising in the cyberlaw realm, the answer to military intrusion in your civilian networks is "how much are you willing to give up in order to be safe?"

Firm Joins Innovation Summit as a Sponsor

Wednesday, August 11, 2010 by Lainey Scheetz

FIRM JOINS INNOVATION SUMMIT AS SPONSOR

For the second year in a row, the firm committed to this year’s Innovation Summit as the Plenary Panel Sponsor.

This annual event brings together entrepreneurs, executives and policymakers for learning, dialogue and debate on the central challenge of today’s economy – turning today’s ideas into tomorrow’s business breakthroughs. The Summit includes keynote speakers, breakout sessions on a variety of innovation related topics, and dozens of trade and industry booths.

Innovation Summit will feature iconoclastic technology writer Nicholas Carr as the keynote speaker, author of the recently released book, The Shallows: What the Internet Is Doing to Our Brains. Agree or disagree with him, Carr makes us think – and that’s the first step towards innovation.

“There is no other event in the city that brings together this unique blend of people. The end result is sure to be an unprecedented amount of thought leadership in the innovation realm. Alerding Castor Hewitt, LLP could not be more excited to be a corporate partner,” comments David Castor, founding partner of Alerding Castor Hewitt, LLP.

Annual attendees include: Chief Executive Officers, CIO, CFO, CTO Executives, University Presidents, Association Leaders, Marketing Executives, Leading Educators and Scientists & Engineers.

Firm at a Glance:

Practice Areas: business counsel, licensing and technology legal counsel, software litigation

Headquarters: 47 S. Pennsylvania St., Suite 700

Founded: April 2007

Partners: Michael Alerding, David Castor, Brian Hewitt

Employees: 17, nine of them attorneys

Clients: 300, including Compendium Blogware, Iasta, First Merchants Bank, Indiana Bank and Trust, MainSource Bank

Facebook ownership lawsuit results in asset-freezing TRO

Wednesday, July 14, 2010 by Chris Stephen

This one is a fun little piece of pseudo-software litigation. The basic facts are that Facebook and its majority stockholder Mark Zuckerberg have been sued by Paul D. Ceglia, who claims 84% ownership in the website juggernaut. The part of this story that has been clogging the Net is that a state court judge in New York actually issued a temporary restraining order ("TRO") prohibiting Zuckerberg and Facebook, Inc. from disposing or selling any of its assets. This has produced the viral "Facebook assets frozen". Interestingly, Ceglia has produced a written contract, making this suit slightly more interesting than prior software litigation involving Facebook ownership in which former students at Harvard claimed Zuckerberg stole the idea from them (which a court ultimately found to be "dorm room chit-chat").

One aspect that the technology legal counsel in me finds interesting is that the Court granted the TRO. Generally speaking a TRO is an injunctive mechanism that can be used to stop someone from doing something. In order to get a TRO, you generally have to show that you have a basis for your claim and that you have a likelihood of success on the merits. I don't know for sure that New York is the same standard as Indiana, but I suspect that it is. That means that a court looked at the documents and found that there might be something here. I find that very intriguing. I will note, however, that Facebook's attorneys filed a motion to dissolve the TRO and noted that it was ex parte, meaning that it was entered without Zuckerberg or Facebook being given the opportunity to respond. It also sets forth that the only evidence presented to support the TRO was a "scant" affidavit. But, one must conclude that the Court nevertheless did the appropriate analysis.

Also, having read the documents filed, there might be something to discuss. However, the biggest issue that I see at the outset is that the contract allegedly happened in April, 2003. It would seem to me that there are is a statute of limitations issue, which may kill this lawsuit before it gets into really fun electronic discovery.

Facebook has removed this case to Federal court, which I think is a smart move. We'll see what develops. But I would urge everyone to consider the reality that this case poses to the software developer or web-designer. From the "Zuckerberg" side, be extremely careful what terms you put in your contracts because you may have to rely on or defend them later (after you are a famous success). In this software litigation, Cegila is claiming 84% ownership in the company based on a damages provision that stated that he would get 1% ownership for each month after January 1, 2004 that the contract was fulfilled. And, if the case survives the statute of limitations issue, this may become hotly contested.

Thus, be careful that you hold tightly to your equity in your company. Don't give it away willy-nilly. And, above all else, get good technology legal counsel; specifically ones that understand what should be in a well-drafted contract and that have available the expertise to determine how that contract language will play out in court.

Who are Alerding Castor Hewitt LLP

Friday, June 11, 2010 by Chris Stephen

Every once in awhile, I have the inkling to make a blog post that is not about developments in privacy litigation or technology litigation or cloud computing law or foreclosures or any of the other endless stream of ideas and legal thoughts that pass across my desk. This is one of those times. Because, while I think it is important for our readers to know that Mexico passed a new data privacy law or that litigation related to CAN SPAM is likely a rising field, I think it is equally important for our readers and clients to gain insight into the psyche of Alerding Castor Hewitt, LLP as it is viewed through the eyes of this humble writer. Thus the question: Who are Alerding Castor Hewitt, LLP.

First, I must note that I intentionally chose the plural tense in that question because, although I agree that Alerding Castor Hewitt, LLP is an entity that could be viewed as a singular, I fully believe that we are made of the people that permeate this place. Thus, we are a plural. Second, if what you are looking for is our resumes and the curriculum vitae of these Indiana technology counsel, you can check them out on our webpage.

Rather, I intend to discuss who we are in such a way that our readers and clients can relate to the ideals for which we stand. We are the rogues. We are the fighters. We are the fixers. We are the counselors. To a person, the attorneys at ACH are products of years of experience. We have all trudged through the mud of the legal profession in other locales before coming to this place. Which, inevitably, leads to the question of "why here?"

The answer to that simple question is that because here we can be what our clients need. We can be entrepreneurs. We can be fighters. We can truly embody the idea of counselor that so many of us sought when we went to law school in the first place.

Does that mean that I always give my clients the advise that they want to hear? No. My job, and the job of any great attorney, is to give the advise that is warranted in the situation. ACH not only gives its attorneys the ability to do that, but rather encourages it. I can honestly say that I have practiced from the biggest of big to the smallest of small, in the private sector and the public sector, and there is no place that I would rather practice law. I have told colleagues that ask me about ACH that I practice law in a way that every attorney wants to practice when they are honest with themselves as to what they want out of their profession.

This place is filled to the brim with spirit, humor, knowledge, and skill. And I think there are two quotes that best answer the question of Who are Alerding Castor Hewitt, LLP. The first is from Ulysses S. Grant. In a speech in London, Grant stated "Although a soldier by profession, I have never felt any sort of fondness for war, and I have never advocated it, except as a means of peace." The second is from Ode by Arthur William Edgar O'Shaughnessy, but was made famous (in my opinion) by Gene Wilder in Willy Wonka and the Chocolate Factory: "We are the music makers, And we are the dreamers of dreams."

Changes in the Get Hope. Get Help provisions

Tuesday, May 18, 2010 by Chris Stephen

Your friendly neighborhood technology counsel here: As you likely know, my goal is to become THE Indiana technology lawyer; however, technology is not my only area of interest. Like many of the folks at Alerding Castor Hewitt, technology law is a passion, but we all strive to be a full service law firm for all businesses. Thus, in addition to tech stuff, I also litigate matters for several banking and business clients. And, as any good lawyer does, when I see changes in the law that may impact my clients, I want to shout it from the rooftops. One such change that, to date, has gone largely unheralded is an amendment passed to the Indiana "Get Hope. Get Help" statute (Ind. Code 32-30-10.5-8).

For those that don't know, this provision, enacted originally in 2009, requires a lender to send a written notice to a mortgage holder regarding their default and options to avoid foreclosure before the lender can proceed with a foreclosure suit. The intended purpose of the law is to avoid unnecessary foreclosure of residential properties by "requiring early contact and communications among creditors, agents and debtors" and "facilitating the modification of residential mortgages in appropriate circumstances." This is debtor safeguard that lenders have to navigate before they can foreclose on a property. The letter itself has a large "GET HOPE. GET HELP" header, hence the nomenclature.

The new provisions amended to the statute in the 2010 session clarify that any time before a sheriff's sale, a debtor can do one of three things with the property. They can: (1) appeal a finding of abandonment; (2) redeem the real estates; or (3) retain possession of the property until the sale. These three things already existed in Indiana law, but are now more clearly set out and obvious. The goal is clearly to make the options abundantly clear to all involved.

To me the more important change is the requirement that the applicable notice prescribed by the statute must be in 14 point font. The necessary language is "Mortgage foreclosure is a complex process. People may approach you about "saving" your home. You should be careful about any such promises. There are government agencies and non-profit organizations you may contact for helpful information about the foreclosure process. For the name and telephone number of an organization near you, please call the Indiana Foreclosure Prevention Network".

So, all you lenders out there heed the warning of the new statute. There are procedures that you must follow before you can even get to a court room. While I understand the reasoning behind these provisions, they are certainly something about which lenders should be aware. The foreclosure process is a necessarily lengthy one, and you don't want to unnecessarily extend that by using the wrong size font.

Privacy Law - Part 2: What the Heck Is It?

Wednesday, April 28, 2010 by Chris Stephen

I must take a moment to open with a caveat. The study of privacy and hence privacy law or privacy litigation is an analysis that spans centuries. In fact, while it seems like privacy issues have only recently come to the forefront with the advent of technology, they have, in fact, been prevalent in ever major level of recorded history. I put this point out there to help you recognize that there are books and books addressing the issues of privacy and my little foray into the issue is but a nail-scratch on the surface of a very large issue. Nevertheless, I would be remiss in my role as an Indiana technology lawyer if I didn't delve into the issue at least from an overview perspective. Now, onto the bigger (and better) question of "what the heck is it?". There are, in my humble opinion, four basic approaches to this question: (1) academically; (2) legally; (3) structurally; and (4) realistically. I will address each approach separately.

Academic Perspective:  In the simplest of academic terms, privacy law is the method and mechanism of protecting the private matters or interests of the citizen. This definition leads to the ultimate issue from the scholarly perspective of what is privacy. The debate over that simple term, however, has raged for years and encompasses an extremely wide umbrella of ideas. From a political perspective, privacy is that sphere of information that wholly belongs to the individual and is unnecessary for the overall governmental function. Aristotle believed that there were two spheres. The first is the public sphere and in this sphere is the information necessary to govern the polis or city-state. The other sphere is the individual sphere in which each person has the information and matters pertinent to only themselves. It does not impact the polis and is solely private, but must exist to ensure the welfare of the entirety. Later, John Lock would address the issue by theorizing that the inherent state of man (the state of nature) is one in which they all have equal right to their self. It is this act of giving up some of these rights to the greater body that leads, according to Locke, to the development of organized government.

Anthropologically, privacy are those matters that we keep from the community at large. Anthropologists have found that even in social settings where there is very little physical privacy, the members of that society will act to protect their own privacy in other matters (i.e. hiding feelings, averting eyes, etc) to maintain some level of intimacy and ultimately, individuality. And this doesn't even get into philosophically, economically, medically, or any other - ly of which we may think. As you can see, the academic perspective is somewhat scattered, but the overarching theme is that privacy (and subsequently privacy law) is the component of self that is maintained to establish and maintain the individual.

Legal Perspective: From the legal perspective, privacy law is the protection of information related to the person. There are two basic types of legal perspective. The first is the protection of private information from a constitutional perspective. This is the basic premise behind the Fourth Amendment. The idea that citizens are free from the government simply prying into their business is fundamental to American jurisprudence. It is also a fundamental difference between the United States and other countries that has led to some very interesting debates related to privacy, but we'll cover that more in Part 2. From a constitutional standpoint, privacy is the protection of the individual from the invasion of the government without a reason. The other legal perspective is the protection of information from the tort perspective. These are the private causes of actions that relate to the invasion of privacy and lead to the majority of the privacy litigation that we see today. Questions such as: can my employer look at my e-mails; can my insurance company see my health records; can this website give my address to the cyberworld. These questions are the bread and butter of the tort perspective. And, frankly, are the most important to my clients. But overall, the legal perspective of privacy is, like the academic perspective, focused on the establishment and maintenance of barriers between individuals.

Structural Perspective:  What I'm calling the structural perspective is actually the most amorphous perspective that I've made up. It is deals with the components and subparts that make up privacy law because the parts make up the whole. But, the components of privacy law are as widely varied as the other definitions. There is a component for protecting information about one's health. There is a component for protecting those activities that one engages in in their home. There is a component for protecting the contents of one's vehicle or property. There is a component for protecting one's personal contact information. There is a component for protecting one's financial information. The list goes on. Needless to say, from a structural perspective, privacy law is the protection of that information that is necessary and pertinent to our identity, well-being, and overarching individuality.

Realistic Perspective: Finally, we get to the perspective that is most likely to impact our individual lives. For the individual, privacy law realistically means those steps and actions that one must take or protect to ensure that information pertinent to your well-being is protected from dissemination to parties without legitimate interest in the information. Whether this is monitoring against identity theft or moving to quash a subpoena that seeks information in violation of HIPAA. These are the steps that have to be done to protect your individual information. For the business, privacy law realistically means the steps and actions that must be undertaken to protect against the dissemination of information related to either my clients, my products, or my business perspectives. This is important both from a regulatory approach and a litigation approach. Both individuals and businesses need to know (a) what information is protected and (b) how to protect it. These are the fundamental realistic questions to be answered.

So, in conclusion, privacy law is an enigma wrapped in a riddle. We know we need it, but aren't always a hundred percent sure what it is. It is rooted in our mythos and theory. It is part of the underpinnings of society, both American and human in general. And, the more connected we get, the more important it becomes. In Part 3, I'll take a look at some of the major legal precedents on the issues of privacy law and litigation. Stay tuned.

Alerding Castor Hewitt Proud Sponsor of Adoptions of Indiana (AD-IN) Annual Golf Outing

Monday, April 26, 2010 by Lainey Scheetz

You might wonder why an Indiana law firm with a practice in several areas of technology (Indiana Internet Litigation, SaaS Legal Consulting to name just two) finds itself supporting a golf outing that raises money for adoption? "As a firm that prides itself on supporting the local community, we don't always align our charitable giving strictly to serve our immediate demographic. There are many organizations deserving of our support and Adoptions of Indiana is certainly one of them," comments Dave Castor, Founding Partner and lead counsel in the firm's involvement with Internet-based companies.

On Tuesday, August 31st Adoptions of Indiana will host it's third annual golf classic at the Golf Course of Indiana. Now in its third year, this event looks to build upon past successes and top past earnings to ensure that critical programming continues for birth parents and adoptive families alike.

Adoptions of Indiana was founded in 1995 by professionals in the fields of mental health and social work whose lives were personally touched by adoption. ADOPTIONS OF INDIANA is a not-for-profit 501(c)(3) corporation that is licensed by the State of Indiana as a child-placing agency.

The agency is a member of the Joint Council on International Children's Services, the North American Council on Adoptable Children, and Indiana’s Adoption Coalition. In addition to being licensed in the state of Indiana, they are also licensed and approved by the state of Connecticut to assist their families who are adopting children born in Indiana.

Adoptions of Indiana works with highly respected and well established adoption agencies and adoption attorneys throughout the United States. Our agency provides domestic and international adoption services to Indiana residents.

TECHNOLOGY LEGAL COUNSEL SPONSOR 2010 TECHPOINT MIRA AWARDS

Thursday, April 8, 2010 by Lainey Scheetz

Given the firm's technology legal counsel and software litigation practice, it only makes sense that the firm would support the prestigious 2010 Techpoint MIRA Awards Gala taking place on Saturday, May 15th, 2010. It makes for a positive synergy between the two groups.

The TechPoint Mira Awards, presented by BKD, is the premier technology awards program in the state of Indiana. Since the turn of the century, TechPoint has honored Indiana businesses, schools and universities, and individuals for their contributions to the state’s technology-related economy. TechPoint’s prestigious Mira Awards program recognizes leaders and innovators in 11 different business categories.

“As a firm that offers technology legal counsel, we appreciate the opportunity to support TechPoint in an effort to further their mission,” says David Castor, partner at Alerding Castor Hewitt, LLP. “We enjoy supporting our clients as much as we can.”

Firm at a Glance:
Practice Areas: business counsel, licensing and technology, litigation
Headquarters: 47 S. Pennsylvania St., Suite 700
Founded: April 2007
Partners: Michael Alerding, David Castor, Brian Hewitt
Employees: 17, nine of them attorneys
Clients: 300, including Compendium Blogware, ExactTarget, Iasta, First Merchants Bank, Indiana Bank and Trust, MainSource Bank

Venue Selection Clauses - The Hidden Danger (Part 1)

Sunday, March 14, 2010 by Chris Stephen

Your friendly neighborhood technology legal counsel here to discuss with you the hidden dangers lurking in your unassuming (and unread) terms of service agreements. Janet Croswell, one of our fabulous tech lawyers, posted back on February 10, 2010 about the pitfalls that businesses face related to the clickwrap agreement (here's a link for those playing along at home blog.alerdingcastor.com/blog/alerding-castor). Now for those of you scratching your head and wondering what a "clickwrap agreement is", the answer is simply those pesky agreements that we all have to agree to in order to do anything on-line and that none of us actually read. I'm fascinated by this stuff and I'll probably only read one in twenty that I ever click past. They are the superfluous hurdle that we fly past in order to enjoy our Internet-y goodness. But, as Janet so wonderfully pointed out, these hindrances are actually contracts to which we are binding ourselves, or worse, our companies. "What" you exclaimed under your breath, "You mean this is binding on me?" And I'm forced to tell you, "yes". Which leads to the inevitable "so what" question.

The "so what" in this scenario is that you are likely locking yourself into a venue-selection provision. I know the phrase sounds like you are making the decision of whether your play Deer Creek or Red Rock during the next summer tour cycle, but actually you are significantly limiting your options from a litigation standpoint. Venue is the place where a lawsuit can be brought. Obviously, you would like to bring a lawsuit near where you are located and where there is law that favors your position, but if you agree in contract that it will be brought in Poe-Dunk, North Dakota, well then friend, that's where you are headed.

Recently, several courts have concluded that venue selection provisions contained within a clickwrap agreement are enforceable. The most recent cases involve the venue-selection provision in the Google AdWords contract. In TradeComet.com v. Google, a New York District Court found that the language from Google that

"THE AGREEMENT MUST BE CONSTRUED AS IF BOTH PARTIES
JOINTLY WROTE IT AND GOVERNED BY CALIFORNIA LAW EXCEPT
FOR ITS CONFLICTS OF LAWS PRINCIPLES. ALL CLAIMS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE GOOGLE
PROGRAM(S) SHALL BE LITIGATED EXCLUSIVELY IN THE FEDERAL
OR STATE COURTS OF SANTA CLARA COUNTY, CALIFORNIA, USA,
AND GOOGLE AND CUSTOMER CONSENT TO PERSONAL
JURISDICTION IN THOSE COURTS."

required the dismissal of an action brought in New York court. The District Court went through a very succinct analysis of the standards for enforcement of a venue-selection provision and then made its determination of both (a) the enforceability of this agreement and (b) the reasonableness of enforcement of this provision in the instant case.

Another court reached the same decision in Flowbee International, Inc. v. Google, again looking at this venue-selection provision in the Google clickwrap agreement. In that case, the District Court ordered transfer rather than simply dismissing the action, but it nevertheless did transfer the case to the Northern District of California.

These two cases illustrate the fact that when you click on that little box, you might be shoehorning yourself into a court that you don't want. To date, most courts have applied the same analysis to as these courts did to determine that you, my friend, are stuck. In fact, the District Court for Southern Indiana reached this decision in Appliance Zone, LLC v. Nextag, previously cited by Ms. Croswell.

Now if you're sitting there wondering, "Ok, Mr. Bigshot at the information technology law firm, what is a poor web-browser and member of the 21st century to do?" My only answer is: tune back in to Part 2.

2010 Top 50 Indiana Super Lawyer: Brian Hewitt

Thursday, February 18, 2010 by Janet Monroe

Indiana Probate Litigation, Indiana Entrepreneurial Law

Congratulations are in order to Brian Hewitt, the newest parter of Alerding Castor Hewitt, LLP, who was recognized this week as one of Indiana's 2010 top 50 Super Lawyers.

Brian concentrates his practice on estate, trust, and guardianship planning, administration, and litigation; and mediation and business law.

He is a Certified Estate Planning and Administration Specialist, a Fellow of the American College of Trust and Estate Counsel, and a member of the Probate Litigation Committee of the American College of Trust and Estate Counsel.

Brian has spoken widely at continuing education seminars on estate planning, business succession, litigation, and mediation.

Congrats Brian!

We are proud that you have chosen to join us as a named partner of Alerding Castor Hewitt, LLP, 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.

Bill Boncosky Joins the ACH

Monday, January 4, 2010 by Janet Monroe

Alerding Castor Hewitt, LLP, Indiana Technology Litigation, SaaS Litigation

Alerding Castor Hewitt, LLP is proud to announce the addition of Indiana technology lawyer Bill Boncosky to the firm.

The former General Counsel for ExactTarget, Bill has tremendous experience as technology counsel for one of the most successful technology start ups based right here in the heart of Indianapolis. A company that had just over a dozen employees when he joined, Bill has substantial experience in licensing agreement negotiations, ASP Law and Cloud Computing Law serving in that role for over seven years. He will be able to provide significant guidance based on solid experiences to many of our clients operating within this industry.

If you're looking for SaaS legal consulting, the attorneys at Alerding Castor Hewitt, LLP can help. The newest attorney to join the firm, Bill Boncosky, is no exception.

Who Owns My Website?

Tuesday, December 1, 2009 by Janet Monroe

Indiana Internet Litigation, Indiana Technology Counsel

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

Don't Drink the Kool-aid, Choose Your Partners Wisely

Tuesday, November 17, 2009 by Janet Monroe

Indiana Technology Lawyer, Indiana Technology Counsel 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.

SaaS Law - MBO Conference

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.

10 Cases Where Online Activity Came Back to Haunt III

Saturday, October 3, 2009 by David Castor

This is part III of a hilarious article by Robert Ambrogi on the IMS Expert Services blog. I am an Indiana technology lawyer focusing on entrepreneurial law, SaaS business law and technology law. As such, this article hits home as it lies at the intersection of social media and legal process. Enjoy.

4. Lawyer's blogging backfires

A California lawyer learned the hard way to watch what you say on your blog. His posts helped earn him a suspension from law practice. But the case has an unusual twist. The lawyer in the felony trial was there not as an advocate, but as a juror. Not only that, but he had not disclosed to anyone that he was a lawyer.

Even though the judge warned jurors not to discuss the case, the lawyer wrote about it on his blog. His posts identified the judge by name and described her as "a stern attentive woman with thin red hair and long, spidery fingers that as a grandkid you probably wouldn't want snapped at you." He gave the first name of the defendant and described his alleged crimes, referring to him as "a stout, unhappy man."

If the defendant was unhappy at trial, he later had reason to smile. When the lawyer's blogging came to light, the defendant's conviction was lifted and he was given a new trial. As for the blogging lawyer, he earned an 18-month suspension from the practice of law.

3. Blogging makes bad medicine

When a doctor decided to blog his own med-mal trial, it was a prescription for trouble. The doctor, known to his readers only as Flea, was already writing his blog when he was served with a lawsuit. As the case progressed, he periodically posted about it, describing his feelings when he was served with the complaint and reported on his own deposition.

When the trial finally got underway, he continued to blog, relaying his impressions of the plaintiffs' lawyer (whom he nicknamed "Carissa Lunt"), describing his "dress rehearsal," and accusing jurors of dozing off. While he may have thought his blogging had gone unnoticed by others in the courtroom, that was anything but the case.

During cross-examination of the physician, the plaintiff's attorney – the very one the doctor had described on his blog – surprised him with the question, "Are you Flea?" Yes, he sheepishly admitted. It was, according to one news account, a "Perry Mason moment."

The next morning, the parties entered into a confidential settlement reported to be "substantial." Ironically, jurors probably had no sense of the import of the question. But it was enough to signal that the plaintiffs' lawyer was prepared to delve into the blog in open court. Given some of what Flea had written there, settlement no doubt seemed the wiser course.

2. MySpace, my downfall

When an attractive New York model sued a high-profile billionaire claiming he had pressured her into sex when she was only 16, the tabloids were in a tizzy. Soon, the story was all over the gossip pages.

But it did not take long before reporters at one newspaper discovered the model's MySpace page. Based on what they found there, the newspaper reported that she was in fact a he. It also reported a graphic description taken from the MySpace page of the model's sexual fantasy involving multiple men and women. Further snooping revealed evidence that the model may have been much older than 16 at the time of the alleged affair.

After the MySpace page came to light, the model's lawsuit against the billionaire seems to have fizzled. But the model filed a second lawsuit, this time against the newspaper that discovered the page. She alleged that the newspaper's description of her fantasy defamed her by portraying her as a "promiscuous slut."

An appellate court disagreed. Because the newspaper reported only that the model had a fantasy – not that she actually engaged in the conduct – it did not defame her, the court reasoned. "The references to the Myspace pages merely served to highlight the ambiguity regarding the sexual identity of the person who sued the billionaire," the court said.

1. YouTube, Your Honor

Nothing, it seemed, could derail the nomination of Sonia Sotomayor to be the first Hispanic on the Supreme Court. Nothing, that is, but the resurrection online of her own long-forgotten words.

First it was that now-famous YouTube video. It showed a 2005 speech by Sotomayor to law students interested in becoming law clerks. The difference between serving in a trial court and in an appellate court, she told them, is that a "court of appeals is where policy is made." Conservatives jumped on the comment, saying it showed her to be a judicial activist.

As if that was not enough of a blow, next came the resurfacing of her 2001 speech, published by Berkeley's La Raza Law Journal, in which she said, "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn’t lived that life."

Fortunately for now-Justice Sotomayor, neither her comment about judicial activism nor her "wise Latina" remark was enough to derail her track to the nation's highest court. But both serve as reminders that no matter what might be at stake, in the age of social media, the shadow of one's past is never far behind.

10 Cases Where Online Activity Came Back to Haunt I

Wednesday, September 23, 2009 by David Castor

This article is just too good and deserves a repost on the Business & Culture Blog. I am an Indiana technology lawyer focusing on entrepreneurial law, SaaS business law and technology law. As such, this article hits home as it lies at the intersection of social media and legal process. The article is by Robert Ambrogi and posted on the IMS Expert Services blog. I will repost it in 3 parts - all are worth reading.

What happens in Vegas stays in Vegas. The same is not true of what happens online. With increasing regularity, litigants, lawyers, witnesses, jurors and even judges are seeing their online activities come back to haunt them in court.

This month, Bullseye brings you the best of the worst – 10 of the most outrageous examples of people caught in the courtroom by what they did on Facebook, Twitter or elsewhere online.

Next month, we will tell you how to participate in social media safely, so that your online activities don't get you in legal hot water.

10. Counting keystrokes
Mary Mack, corporate technology counsel for the e-discovery company Fios Inc., once worked on a personal injury case in which the plaintiff claimed that his injuries left him unable to use his hands for anything but minimal activities. Searching the Web for information about the plaintiff, the defense team discovered that he was a blogger. Not only was he a blogger, but he was a prolific blogger.

Had the defense counsel simply confronted the plaintiff with his numerous blog posts, that probably would have been sufficient to discredit him. But the defense team went an extra step. It downloaded all his blog posts and calculated precisely how many keystrokes would have been required to write them all.

When the defense confronted the plaintiff with that number at trial, the plaintiff's facial expression no doubt said even more than his well-functioning fingers ever could.

9. Texting is a no-no
During a video deposition, the deponent, an executive of the company being sued, was in California. Plaintiff and defense counsel were in New Jersey. The deponent's pro hac vice attorney was in Michigan. The video stream showed deponent and his PHV attorney from only the chest up.

Turned out, deponent and his counsel were busy below chest level, texting each other throughout the deposition. No one might ever have been the wiser, had PHV counsel not inadvertently addressed one of these text messages to plaintiff's counsel.

Needless to say, plaintiff's counsel went straight to court, demanding to see the text messages. The defense fought their release, arguing attorney-client privilege protected them. A federal court in New Jersey sided with the plaintiff and ordered the text messages handed over. Texting was no different than passing notes, it ruled, and violated the Federal Rules of Civil Procedure.

8. Twittering from the bench
A magistrate in England found himself steeped in hot water after it was discovered that he was "tweeting" about his cases. It all came to a boil after another magistrate discovered the tweets and complained.

The tweets came after the magistrate was called in on a Saturday to hear bail applications for defendants arrested the night before. "Called into Court today to deal with those arrested last night and held in custody," he tweeted. "I guess they will be mostly drunks but you never know."

He continued to tweet as he heard the cases of three men accused of robbery. For example, one tweet said, "1st defendant. Conspiricy to rob TSB of £500,000. Good start - wrong previous convictions presented." He later concluded with this tweet: "Finished hearing bail. 3 refused for planning robbery of £480,000 from Tsb in Dawley, Telford."

When the magistrate learned that his tweets were to be investigated by a judicial advisory committee, he chose instead to resign from the bench. But even as he resigned, he maintained he did nothing wrong. Where better to defend himself but on Twitter, where he posted this explanation: "I didn't tweet whilst sitting in court but in the retiring room during the break and at the end of the hearing."

Indiana Considering Cutting Technology Funding by $70M

Wednesday, June 24, 2009 by David Castor

This ticks me off. I understand that in a struggling economy the State needs to make budget cuts, but instead of cutting spending in areas that ultimately do not lead to economic improvement, our State representatives are considering cutting spending in an area that have been the lifeblood of the State for the last quarter century – technology.

This may have a huge impact on my clients as my law practice centers on Indiana technology businesses – helping technology businesses get innovations to market and meet strategic business growth needs. In particular, I work with a number of SaaS and software licensing businesses (as well as many biomedical and biotech firms). My entreprenurial law / funding law firm provides counsel on private equity and venture capital, intellectual property and licensing, and general legal technology consulting.

I believe at least a part of the problem that led to the proposed cut is that past technology funding has not proved itself to the State as creating jobs and causing a respectable ROI / economic increase for the State. The State has sunk an overwhelming proportion of funded dollars into biomedical businesses (e.g., the 21st Century Fund has sponsored some 10 companies in the last 4 years that have products in development for cancer treatment).

Don't get me wrong, those businesses are great and need to be supported, but the process of getting innovative concept to market for biotech and biomed companies is long and expensive. Further, until the product is successful at market, significant numbers of jobs are not created. So, funding ROI decreases (at least for the short term). The overall funded portfolio should be diversified with other technology investments that will result in more jobs and more tax dollars back to the State quicker.

Investments in Internet and SaaS companies could be that answer. For $500k to $1M, most SaaS companies can get product to market and begin generating revenue. Job creation and the ROI on invest dollars is proven quickly. Innovation is encouraged, businesses are built, jobs are created. This all leads to fast economic impact.

I believe Indiana’s past approach on technology funding was flawed, and I think that is shown in the distrust of the State legislature to invest further dollars in technology.

That said, some recent conversations I have had with State leaders involved with technology funding gives me some hope. These particular unnamed individuals appear to be looking for more solid investments that will quickly lead to jobs. They are also not only looking at investments in companies that have connections to political dollars (another problem with certiain past State investments). They also seem to be thinking a bit more broadly about what defines “innovation”.

For those readers of this blog in Indiana, contact your State representative and ask them to continue to fund technology.

SaaS Law - Don't Ignore Boring Contract Provisions

Thursday, June 4, 2009 by David Castor

Let's face it - most contract terms are boring. SaaS licensors and their customers want to close deals. They want to hammer out the business terms and key legal terms and get the contract done. I don't blame them. Nobody in their right mind wakes up in the morning and says "I want to negotiate a contract today."

After weeks (or even months) of negotiations over key business and legal terms, the parties often are left with a few miscellaneous "legal" terms that seem more of a burden than important to the ultimate goals of the transaction. One common term that reaches these final stages is the forum selection clause (i.e., if a lawsuit arises based on the contract, where will it be brought?).

An Indiana technology company obviously wants all actions to take place in Indiana courts. The out of state (or out of country) customer wants their home forum.

So the key question is: Is this clause really important enough to delay closing the transaction?

My favorite attorney answer: It depends.

As a business law attorney, answers are not always so clear. For instance, a SaaS client of mine once asked me regarding a large scale SaaS licensing agreement valued at hundreds of thousands of dollars in which we were negotiating a choice of law clause, "What is the difference between choosing Indiana law or Illinois law to govern this contract?" There are two potential answers. The first answer engages the standard large business law firm approach - have an associate draft a massive memorandum comparing statutory and case laws of each state on each and every clause of the contract and then outlining each and every difference to the client. Spend: 40 legal hours @ $250/hr = $10,000.

The second answer is approached from a business risk standpoint. This is usually more what the client is looking for. The attorney answers that there will be some differences but anticipates the differences will be fairly minor as both are seventh circuit states and have approached business law in very similar manners. That said, this does not mean there are not differences in law, and we can look into specific issues further if there are key issues you want addressed. Spend: 0.3 Hour @ $250/hr = $75.

The second answer provides a platform of risk assessment for the client to make an informed decision. Do they want more information or are they willing to take on the risk of not knowing all of the answers in order to get the transaction done.

That example is for choice of law. With forum selection clauses you are taking on the risk of a lawsuit arising from this contract and the need to bring an action on this contract. The attorney can either do a detailed analysis of the differences in procedure and history of case law in SaaS transactions in the other state or provide the client with the opportunity to weigh the risk.

An out of state (or country) forum selection clause will greatly increase the costs of an action on the SaaS licensor. So, there are several factors to consider when weighing the risk.

Is the SaaS licensor collecting a subscription fee over time or payment upfront? A foreign forum selection will make small collection actions more difficult to obtain.
Does the contract provide for attorney's fees and collection costs to be recovered by the SaaS business?
Does the foreign selection clause put the SaaS business' customer on their home turf (there is a such thing as home court advantage in law) or is it a neutral site?
What is the estimated cost for securing counsel in the forum (e.g., If you have London or New York forum, the SaaS business will pay double or triple on legal rates than Midwest rates).

Moral of the story - consult with an attorney who truly wants to get business deals done and weighs risks with you based on particular transactions. Be aware of attorneys that want to provide over analysis on all provisions or ignore the particulars of a transaction. Finally, don't overlook what sometimes are considered miscellaneous, general or "boilerplate" terms. There are often "hidden" costs down the road in these clauses.

~~~~~~

Alerding Castor is an Indianapolis law firm focusing on business law, information technology law (including SaaS law and legal technology consulting), private equity consulting, probate and business litigation.

Compendium Blogware in Business Week

Sunday, May 3, 2009 by David Castor

Congratulations to Indiana technology / SaaS company Compendium Blogware who was named as one of America's Most Promising Startups by Business Week this last week.

Compendium Blogware is a Web-based blogging platform built for businesses and organizations. With its administrative layers and proprietary compending feature that maximizes search engine optimization, the company offers businesses an innovative solution for lead generation, customer acquisition and humanizing their marketing.

My business law / SaaS law firm, Alerding Castor, has partnered with Compendium as both a customer (the Business & Culture blog is powered by Compendium) and it's legal counsel.

Here is an excerpt from the article:

Showing up near the top of Google (GOOG) search results is the Holy Grail. The trick, of course, is figuring out how to gain such prominence without forking over a fortune on paid keywords. One way to do that is to post as many blogs as possible sprinkled with keywords aimed at attracting readers. But Chris Baggott, who co-founded e-mail marketer ExactTarget after the dot-com crash, found that blogging tools designed for businesses keen on raising their profiles didn't really exist. The result is software-as-a-service (SaaS) business Compendium Blogware, which Baggott, 48, co-founded with Ali Sales, 28, a colleague from ExactTarget, in July 2007. So far, Baggott says the 45-person Indianapolis company has raised almost $3 million from investor angels, friends, and family and has nearly 400 clients, from a family-owned liquor store in Greenfield, Ind., to Roto-Rooter franchises in the Midwest.

~~~~~~

Compendium Blogware is a member of Alerding Castor's Partners in Success program. Partners in Success is a group of professional services companies, consultants, clients, and friends (e.g., marketing companies, accountants, wealth management firms, logistics or sourcing providers, business consultants) which have proven themselves to bring further value to us and our clients.

Who Would You Hire from “The Office”?

Thursday, October 9, 2008 by David Castor

As many readers of this blog know, I am a business law attorney who partners and provides legal counsel to Indiana technology and software licensing companies. I have found that one of the biggest headaches for business owners in these industries is making wise hiring decisions - especially in hiring their sales staff.

There is a fun blog article this week on Career Builder's blog site entitled "Who Would You Hire from the "Office": Three Tips on How to Find the Best Salesperson". I am a big fan of the TV show the "Office". The show is a mockumentary of business life in America. The show follows the lives of several characters in a regional sales and distributions office of a large paper manufacturing corporation - each character is a stereotype of people commonly found in corporate office environments (Some of the attorneys and staff at my firm, Alerding Castor, refer to me as "Michael Scott" due to our apparent resemblance in leadership styles - I don't see it!).

A good sales staff is the front line of any successful venture. Hiring good sales employees is difficult. Employers are weighing several character traits and skills from potential hires such as their sales track record and career story, work ethic and recommendations, cultural "fit" with the company, and adaptability "fit" with the industry or market. Take a look at the Career Builder blog article to see how this blog writer assesses the employees of Dunder Mifflin's Scranton Branch to find the best sales hire of the Office.