FTC settles case with paid reviewer

Sunday, August 29, 2010 by Chris Stephen
Back in October, 2009, I posted about the new endorsement / testimonial rules set out by the Federal Trad Commission (blog.alerdingcastor.com/blog/alerding-castor/0/0/ftc-makes-changes-to-blog-law).  There has been some development since that time, but mostly everyone is still watching and waiting.  The FTC did threaten to pursue Ann Taylor back in April, but otherwise, it has been relatively silent.

That is, however, until now.  On August 26, 2010, the FTC reached a settlement with Reverb Communications regarding positive reviews that it left on iTunes for its clients' apps (FTC No. 092-3199).  This is an instance where the FTC investigated and pursued an online review source that failed to disclose its material relationship with the party it reviewed.   

Reverb Communication reached a settlement with the FTC in which it agreed to remove all product review or endorsement that is currently viewable by the public.  There is also a five (5) year evidence maintenance component, including producing all complaints.  Finally, there is a requirement that Reverb and its owner deliver copies of the settlement order to all of its current and future employees, agents, and representatives.    

I don't really know whether this can be classified as software litigation, privacy litigation, or any other hot-button issue, but as a technology legal counsel, I find this order and settlement to be extremely important.  With this very public order, the FTC is making a shot across the bow of all businesses that engage in on-line review of products as part of their business plan.  The public nature of the Reverb order is, to me, more telling than any of the language contained therein.  Thus, if you blog and '/ or make endorsements as part of your business plan, you need to have your eyes on the lookout for areas where your material connection can be questioned.  If those areas, exist, you are exposed to the sanctions and reach of 16 CF.R. 255.0.  BE AWARE!

One thing to remember is that the reviews posted by Reverb were not excessive or detailed, and could well have been completely true.  "Amazing new game"; "ONE of the BEST"; "Really Cool Game", etc.  Obviously, these were not voluminous diatribes expounding the virtues of their client.  I almost wonder if the FTC would have scrutinized them as much if they had been more detailed, i.e. if it were more obvious they were paid, would the FTC care as much.  

Another point to ponder is that the Reverb order does not go after any of the clients of the company who paid for these endorsements.  But, the FTC has considered doing just that in the past.  Thus, clients of businesses that are paid for building product and branding support need to be aware of these risks.  You may wish to consult with your technology legal counsel to include language in your agreements that protect you against the ramifications of an FTC probe into your marketer.  Or if you are a marketer, you may want to consider adding language to your agreements that detail what you will do or won't do with regard to this issue.  

Here is a scenario that I can easily see playing out.  Marketing Company X enters into an agreement with Client Y for, among other things, on-line marketing and endorsement.  Marketing Company X doesn't comply with the FTC guidelines and gets an inquiry.  Client Y also gets swept into the inquiry and the "scandal".  Client Y then sues Marketing Company X for damages in lost profit, costs, and injury to reputation that it incurs as a result of the improper reviewing.  And, I'm not sure that 47 USC 230 would give the Marketing Company X much protection.  Thus, if you are Marketing Company X, I suggest that you make sure that such possibilities are clearly addressed in your upfront agreement.

The bottom line is that these laws are not new, but orders like the Reverb order are indicative of a new push by the government to regulate the Internet, and a wake-up call to the fact that the U.S. Government is watching the 'net.  If you make your living through the online presence and word-of-mouth, you need to be aware and plan accordingly.  Change your actions now to protect yourself down the road.
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BUSINESS LAW – WHAT’S IN A NAME?

Thursday, August 26, 2010 by Scott Kreider

Your friendly Indianapolis attorney at Alerding Castor Hewitt LLP here with a history lesson and tie in to business law.  Most of you have probably heard the term “gerrymander” and know that it refers to a process of dividing a territory into districts in order to give one political party an advantage over another by concentrating the voting strength of that party in as many districts as possible.  Fewer of you probably know the origin of the term, and I imagine that  even fewer know much about the man whose name spawned the term.

 

The term first originated in 1812 to describe a rather bizarre looking district boundary in Essex County, Massachusetts attributable to then-Governor of that state, Elbridge Gerry.  Gerry had signed a bill passed by the state’s legislature to redraw districts that favored his party, the Democratic-Republicans, over the Federalists (whose influence was on the decline).  Gerry would go on to be elected Vice President later that year and served under President James Madison; however, he died a couple of years later in office at the age of 70, thereby becoming the  first Vice President who did not go on to become President.

 

Despite the notorious practice that has been associated with his name, Gerry was a Founding Father who made several contributions to the country:  For example, he was a signer of both the Declaration of Independence and of the Articles of Confederation.  He was also among the dissenting voices that refused to sign the Constitution because it did not contain a bill of rights.  As those historians among you know, it was an agreement to create the Bill of Rights (the first ten amendments to the Constitution) that helped to secure ratification of the Constitution.

 

So how does this tie in to business law, and how does it relate to our business law, Saas law, entrepreneurial law, Indiana technology, and trademark clients?  It illustrates how one false step can overshadow an individual’s contributions to our global community and then be forgotten to history.  We at Alerding Castor Hewitt LLP know how important your name and reputation are to you; we feel the same way about our own name and reputation.  It’s why we are committed to working with you at the planning stage of your business, in securing venture capital, and in helping you with your litigation needs so that you can secure and maintain that name and reputation, and the goodwill that goes with it, so that your name doesn’t get sullied and become the next “gerrymander.”
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Minority and Women Owned Business Enterprises

Friday, August 20, 2010 by Janet Monroe
Indiana Technology LawyerSomething that women and/or minority business owners may want to consider is registration with the Indiana Department of Administration Minority and Women's Business Enterprises Division to become certified as a minority-owned or woman-owned business.

Established in order to give such businesses an equal opportunity to participate in the state purchasing process, the criteria considered for such certification include that the minority/woman member possess:
  • ownership of the business (at least 51%);
  • the requisite expertise in the industry;
  • management and control of the entity and its operations; and
  • U.S. citizenship.
It is an onerous application process, which includes on-site visits, interviews, and the submission of documentation to support the status of the business.  However, it could be well worth registration to those who are qualifying entities, as each year the Governor's Commission on Minority and Women's Business Enterprises votes on contracting goals and sets the level of participation for minority- and women-owned firms on state contracts.

If you are a minority or woman owned business enterprise, you may want to consider certification to give you an edge on state contracts and perhaps other opportunities.

As an attorney with Alerding Castor Hewitt, LLP, an Indianapolis business law firm that provides legal counsel to companies of all sizes, my practice ranges from formations of young start up companies to assisting with licensing agreement negotiations for well-established corporations. 

And, as a woman and a minority myself, I am more than willing to help guide clients through the process to achieve certifcation as a minority or woman owned business enterprise. 
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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

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INDIANAPOLIS LITIGATION—COMMISSIONS AND WAGES

Thursday, August 5, 2010 by Scott Kreider

It’s not often that we at Alerding Castor Hewitt, LLP run into issues regarding the payment of commissions for our business law, SaaS law, and Indiana technology clients.  When the subject does arise, however, it usually occurs when an employee separates from employment and makes a wage claim for unpaid commissions.  The debate about whether the commissions are wages centers on whether the employee was entitled to the commission at the time of sale OR when the client pays for the product, service, etc.  Employers often want to argue that the latter applies, and for two obvious reasons:  (1) they want to avoid the penalties for unpaid wages, and (2) it can be economically difficult if not impossible to pay a commission if you don’t have the funds available because you are waiting on the client(s) to pay.

 

A recent decision by the Indiana Court of Appeals this week illustrates the issue.  On Wednesday, the Court issued its for-publication decision in Wells Fargo Insurance, Inc. v. Land, No. 48A02-0911-CV-1099.  The facts are fairly straight forward. Mr. Land sold crop insurance for Wells Fargo.  After Mr. Land separated from Well Fargo to start his own business, Wells Fargo sued Mr. Land for violating a covenant not to compete.  Mr. Land counterclaimed for unpaid commissions.  Wells Fargo argued that the unpaid commissions were not earned until after a farmer paid the insurance premium and relied on a written plan or policy to support its position.  In contrast, Mr. Land presented evidence – including deposition testimony from a manager – that he was never advised of this policy and was unaware that the policy existed.  Mr. Land won at the trial level and on appeal.

 

In addressing the issue on appeal, the Court of Appeals noted the general rule that a party is entitled to commissions right away on business that he/she has secured regardless of when payment is received by the employer.  The Court also noted that this general rule can be altered by written agreement or conduct of the parties.  Ultimately, the Court concluded that Wells Fargo’s policy did not alter the general rule because Mr. Land was neither aware of nor apprised of the policy on commissions.

 

The case illustrates a good point for business law, SaaS law, and Indiana technology clients:  trying to simply rely on a written policy, or worse yet, custom and practice, when sued on the issue of unpaid commissions is a tough row to hoe.  You will have to contend with credibility issues, who said what, and who was advised about what.  A better practice to consider would be a written agreement or signed acknowledgment by your employees that they have received the policy that commissions won’t be paid until after payment from the client is received, and that the employee agrees to be bound by the policy.  Anything short of that could result in you having to face the same hurdle that Wells Fargo did.
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ALERDING CASTOR HEWITT, LLP CLIENT NAMED 10TH FASTEST GROWING PRIVATE COMPANY IN INDIANA FOR THIRD TIME

Friday, July 23, 2010 by Lainey Scheetz

FOR IMMEDIATE RELEASE
July 23, 2010
Contact: Lainey Scheetz
317.403.9012
lscheetz@alerdingcastor.com

ALERDING CASTOR HEWITT, LLP CLIENT NAMED 10TH FASTEST GROWING PRIVATE COMPANY IN INDIANA FOR THIRD TIME

Indianapolis, IN – Iasta, the leading provider of eSourcing software and solutions, was titled as the 10th Fastest Growing Private Company in Indiana for 2010 by the Indianapolis Business Journal (IBJ).  A third time honoree, Iasta boosted its three-year growth rate at 134 percent.

The report profiled Iasta’s founding’s, current offerings and future outlook.

The IBJ ranks companies by their revenue growth over the last three consecutive years, which must exceed $1 million annually.  In 2009, Iasta ranked 17th and in 2008 they ranked 14th.  The award is based on revenue growth of the last three consecutive years.  Iasta has thrived in a market where many others have been forced to make budget cuts and layoffs.  “We’ve established a lot of credibility and there’s a lot of growth yet to be had,” said Bush.

Iasta experienced very rapid growth in its younger years at 80 to 90 percent a year.  These days, the company still grows at 30 to 40 percent annually.  Bush attributes the success of Iasta to flexibility and high quality in both software and services.

Dave Castor has represented Iasta as general counsel since 2002. 

Firm at a Glance:

At Alerding Castor Hewitt, LLP, the attorneys focus on business law, litigation and technology law services.  The firm has unique experience in niche markets such as software and technology licensing, e-commerce and Internet law and international business law. 

For additional information, please visit www.alerdingcastor.com.


 

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Indianapolis Litigation — Successful Resolution For Saas Law Client During Collections Process

Thursday, June 24, 2010 by Scott Kreider

Your friendly Indianapolis attorney at Alerding Castor Hewitt LLP here with a quick follow up on my first blog regarding collections for our business law, technology law, and SaaS law clients.  A link to that post is listed below for those interested.

One of our Saas law clients recently obtained a favorable resolution in one of their cases to collect on a contract from an out-of-state debtor.  We had obtained a default judgment for the client and were pressing forward with the proceeding supplemental here in Indiana.  I don’t know if the debtor was ignoring the process, moving around the country, or what was going on, but he wasn’t responding.  However, he finally contacted us when he ran into trouble trying to enter into a lease; apparently the judgment popped up on his credit history when the landlord ran a credit check.  To make a long story short, the debtor was more than willing to come forward to settle the claim with our Saas law client.

This success story just bears out the point of my original post:  it’s worth taking some minimal time and expense to proceed with a proceeding supplemental in Indiana on out-of-state folks before undertaking some more involved process.  The result can be surprising.     

blog.alerdingcastor.com/blog/indianapolis-litigation/0/0/indianapolis-litigation-the-collections-endgame
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Imposing the long-arm of the law over the Internet

Wednesday, June 23, 2010 by Chris Stephen
Your friendly neighborhood technology counsel here:  A couple of recent state court decisions are going to start personal injury attorneys frothing at the mouth, and might render some sleepless nights for defense attorneys.  Both Ohio and Florida recently issued opinions in which they applied their state's respective long-arm statutes to garner personal jurisdiction over an out-of-state resident for tortious conduct that transpired over the Internet. 

First, you need to know what a long-arm statute is.  Essentially, it is a mechanism by which a state can obtain jurisdiction over an out-of-state resident for activities or actions undertaken that are related to an in-state resident or citizen.  Without boring you with the legal details, they stem from the concepts of full faith and credit and due process and require a minimum amount of contact within the state to trigger.  And, they have posed a pickle in Internet litigation because the Web allows access from out-of-state residents without actual presence or contact.  At least that was the case until recently.  

In Internet Solutions Corporation v. Marshall, the Florida Supreme Court, addressing a certified question from the Eleventh Circuit, determined that exercising jurisdiction over an out-of-state resident under Florida's long-arm statute did not violate due process.  The basic facts are that Marshall ran a website based out of Washington, where she is a resident.  She had no contact with Florida other than a short business related trip several years ago.  However, she wrote a blog about a Florida based company and then she and some other posters trashed them online in the comment section.  The Florida-based company sued for defamation in federal court under a diversity action (action between two citizens of different states).  The district court found no personal jurisdiction and the Eleventh Circuit certified the question to the Florida Supreme Court.  The Florida Supreme Court looked at two main analysis points:  (1) whether the complaint alleged sufficient jurisdictional facts to being the action within the ambit of the statute, and (2) whether sufficient minimum contacts are demonstrated to satisfy due process requirements.  The Court determined that both were satisfied.  An interesting analysis point is that the Court reasoned that the long-arm statute had been applied to telephonic, electronic or written communications in the past and that the Internet is an extension of those rulings.  Overall, it is a well-reasoned opinion applying a standard long-arm statute to the Internet.

Similarly, in Kauffman Racing Equipment, LLC v. Roberts, the Ohio Court of Appeals reached a similar conclusion when determining if an out-of-state residents comments over an Internet blog about an in-state plaintiff can be grounds for jurisdiction over the out-of-state resident in a defamation action.  The Court utilized the same general analysis as in Marshall.  

The obvious implications to Internet litigation of these opinions are pretty substantial.   Until now, suing for tortious actions done over the Internet has been difficult because of those pesky due process minimum contacts, but that is slowly changing.  These cases are a framework for an enterprising personal injury lawyer to sue someone that has never set foot in their state for tortious activities on the Web.  And, right now we are only talking about defamation, but why wouldn't it extend to other torts.  What about tortious interference with a business relationship, intentional infliction of emotion distress, and assault, to name a few.  This is going to change the face of Internet litigation.  We are going to see more lawsuits based on this.  And, further, you, as a business owner, will need to be aware of what you are putting out on the cyberspace.  You may be inadvertently exposing yourself. 

And think of the other areas of technology litigation that this can be tied into.  Two of the most predominant to me are privacy litigation and cloud computing law.  Imagine that I have posted private information about you on the Internet in contravention to the law.  We've never met and I've never been in your state, but the Internet has.  Under these holdings, I can be hauled into the courtroom to address my actions.  Or I've placed something into the cloud that doesn't belong.  I've now exposed myself to multiple jurisdictions depending on to whom I have shown the material.

The ramifications are mind-numbing, but we'll see what other states start jumping on board.  As I've always said, technology litigation and Internet litigation is in its infancy and we are going to see wide-spread changes from court's making decisions at the federal and state court level.  It should be fun.

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PURE Eatery Delivers Fresh Honest Food

Tuesday, June 22, 2010 by Janet Monroe
Pure Eatery Fresh Honest FoodToday is an exciting day for Indianapolis with the establishment of a brand new local eatery called "Pure" located in Fountain Square at 1043 Virginia Avenue. 

Working with the business owners through Indiana entrepreneurial law, I checked in to see what the place had to offer this afternoon.  I couldn't be more excited about the fresh flavors and the funky atmosphere.  With original artwork and high ceilings, it has a Chicago vibe with a menu focused on fresh honest food.  Perfect.

Today I chose the asparagus salad with the Caponata flatbread panini with eggplant.  Needless to say, it was delicious.

The daily specials are based on local, organic, and seasonal availability.  A healthy alternative for lunch, Pure is green and supports the local economy... I could eat here everyday.  Pure Eatery will definitely be on the regular rotation as one of my favorites downtown. 

I'm glad to help the owners with Indiana entrepreneurial law, and excited to see this dream of theirs come to life.   If you're in the area, you should stop in to see them.  The food is incredible and the service even better.

Check them out at pureeatery.com

Hours:
11-7 Monday - Saturday
12-5 Sundays


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Funding Law – Investor Impatience

Friday, June 18, 2010 by David Castor
I read around 2 new business plans per week – about 100 per year.  Some private equity investors I know read upwards of 10 per week – or about 500 per year.  When you are reviewing that many of anything, you get impatient.  That is why I encourage business owners writing plans for private equity investors or angel investor groups to be succinct. 

Get to the point.  What does your company do?  What pain are you solving in the market?  How will you do that at a profit?

Business summaries should avoid flowery language (e.g., “ABC will offer innovative products in a global market…”) – just say what the business does.  If you have pictures of the product or screen shots of the user interface for software, include it on page one.  Make the product and market opportunity simple to understand in a few sentences.

Clearly define your sources and uses – who are you targeting for investment and what will the funds be used for (not just expenses, but what scaling milestone will the funds help you achieve).

Your revenue projections should never be labeled as “conservative”.  Your projections should be based on what you expect to happen.  You should know within close certainty your expenses for the first couple of years (especially your fixed costs), and you should know enough about your market and target base that you should be able to make a good projection on revenue.  “Conservative” makes it look like you are guessing.

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Radical Innovation - Searching for the new frontier

Wednesday, June 16, 2010 by Chris Stephen
I'm going to cheat a little on this.  I read a great blog post by Jeff Ready over at the McStartup blog (www.mcstartup.com).  The blog post is all about the importance of radical innovation.  I have a place in my heart for radical innovation because I believe that in the legal community, we are the radical innovators.  ACH strives after its goal to be an information technology law firm, a venture capital law firm and a business law firm, but we go about it in a way that is radical to many other attorneys, because we are business-minded first and we are looking at the areas of business that others are overlooking.  So, rather than re-capsulate Jeff's thoughts, here they are in full quoted glory:

The Art of Radical Innovation

Following up on my post about Tom Mason and Rose-Hulman, I wanted to touch on something that Tom is a big believer in and used as the focus of his retirement speech:  radical innovation.Radically innovation refers to that type of innovation so powerful and different that it can completely change the profession, institution, industry, business, or person in one fell swoop.  Thinking about how radical innovations come about and how they impact the world around us is a favorite subject of Tom.

I bring it up here, because I believe that radical innovation is the key to success in whatever you do – and not just radical innovation, but, as Tom puts it, “continuous radical innovation” – the constant search for those things that will turn your world on its head.

It is true that most businesses are looking to innovate, but to think about radical innovation really changes the way you view things.  It’s very different from thinking about “constant innovation” or “continuous improvement” which is the mantra of many businesses today.  As Tom quipped during his speech, “General Motors followed the mantra of continuous improvement all the way into bankruptcy.”

 Put another way, and to borrow from the world of academia, continuous improvement gets college campuses wired, installs the latest lab environments in the buildings, and creates a campus environment more rewarding for the students.  Radical innovation moves the entire university experience online and does away with the campus altogether.
Continuous improvement puts shocks on your carriage.  Radical innovation replaces the horse with an engine.  Continuous improvement accelerates the reload speed and accuracy of your rifle.  Radical innovation gives you a machine gun.   You get the idea.

The challenge is to continuously seek the radical innovations in your business – to look for and to go after the very technologies that, if developed elsewhere, would bring a swift and painful end to your business.  In the mean time, of course you need to look for ways to improve your business, your products, and your practices.  However, time and resources need to be spent going after the radical, not just the better.

This probably sounds a lot easier than it is.  Radically innovation is an unpredictable, expensive, and messy business.  With limited resources, the temptation will always be to direct those resources toward the projects that will have the most immediate and predictable impact.  Just as you would imagine the mad scientist to find himself surrounded by doubters (right up until the invention actually works), you’ll find that investors, employees, partners, and competitors will view resources directed to these “rogue projects” as wasteful, silly, and distracting. 

Thus is the challenge of going after radical innovation within an ongoing enterprise.  The near term benefit sits squarely on the opposite, and in a world of business that’s often driven by quarterly numbers, high rates of employee turnover and movement, and a desire for immediate satisfaction, it can be extremely difficult to manage the balance of resources between what is today’s reality, and what might change that reality. 

The pressure will be on improving today’s reality.  But if you’re not careful, you’ll have the world’s greatest carriage company – right up until Henry Ford hands you your lunch – just ask GM.  

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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."  

 

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China Issues its First E-Commerce Regulation

Thursday, June 10, 2010 by Chris Stephen
China has enacted the "Interim Administrative Measures on Internet-based Transactions of Goods and Related Services" that will take effect on July 1, 2010.  This regulations should have a significant impact on e-commerce in China.  One can only assume that it will also impact Software Service Level Agreements, SaaS law, and cloud computing law.  The regulations appear to be focused on Business - to-Consumer issues and consumer-to-consumer activities, but the actual language of the regulation is pretty broad.   There are quite a few requirements related to form, contracts, issuing receipts, collection and treatment of information, record retention, etc.  

The main thrust of the regulation is to aimed at C2C platforms like taobao and E-Bay.  These platforms will need to verify vendor information as being a real name with real contact details.  It also push individuals to establish companies and obtain business licenses.

The impact that this regulation is likely to have on U.S. e-commerce or U.S. Business in general is likely nominal.  However, it does illustrate a trend toward regulation.  Luckily for me, more regulation means more work for yours truly.    



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Indianapolis Attorney—Preliminary Injunctions And Probate Litigation

Wednesday, June 9, 2010 by Scott Kreider

Your Indianapolis Attorney at Alerding Castor Hewitt here with another litigation post for the business and technology world, this time regarding preliminary injunctions.  What is a preliminary injunction?  In simple terms, it is an equitable remedy that you can seek asking a court to order someone else to stop doing something or cease threatening to do something that is causing or is likely to cause you irreparable harm.  It is another weapon in the litigation arsenal, one to restore the status quo between you and another entity until a court can resolve your dispute.

A request for a preliminary injunction can arise in any number of situations.  I won’t try to name all of those that I have encountered, but one example involves claims of infringement of intellectual property (trademark, copyright or patent).  Another example is interference with a contract.  And of course, a recent example is the decision by the U.S. District Court for the Southern District of Indiana in Workman v. Greenwood Community School Corp., cause no. 1:10-cv-0293-SEB-TAB (S.D. Ind. Apr. 30, 2010), enjoining a school from permitting a school-endorsed prayer at a high school graduation.

The difficulty in obtaining a preliminary injunction should not be underestimated.  This is in part due to the hefty applicable standard for this remedy, which includes a showing of a reasonable likelihood of success on the merits.  And sometimes just finding time on a court’s calendar on short notice to hear your arguments can be a challenge.  But if you can convince a court to issue a preliminary injunction, it is not unusual for a settlement to follow on the heels of the court’s order, in part due to the fact that the court will have concluded at that point that you will likely succeed on the merits of your claim.

Another possible result, though rare, is a decision by the court to consolidate a preliminary injunction hearing with a trial on the merits.  This happened recently on a case handled by Brian Hewitt and Angela Hopper (a contract attorney who has provided assistance on a number of occasions).  Brian and Angela were seeking to obtain a preliminary injunction in a probate litigation matter involving the appointment of a guardian to oversee the health care of an elderly lady.  Their clients’ claim boiled down to a request that a settlement agreement be enforced.  Not only were they successful, but the court took the interesting step of consolidating the hearing on their motion with a trial on the merits and entered judgment outright on their clients’ claims.     

Brian and Angela’s case reveals an exciting aspect of litigation:  sometimes the outcome of a hearing can be a surprise (and better than anticipated).  In any event, deciding whether to seek a preliminary injunction is no light undertaking.  As with any litigation matter, you should consult with your counsel to weigh the pros and cons before making a decision on whether a request for a preliminary injunction will advance your interests.  


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Mexico Passes New Data Protection and Privacy Law

Tuesday, June 8, 2010 by Chris Stephen
Your friendly neighborhood technology counsel here:  So, Mexico recently passed a new data protection law.  On April 27, 2010, Mexico passed the Federal Law for the Protection of Personal data, which is likely to be signed into law by the President in the near future.  This law not only allows for a mind-boggling $1.5 million penalty for violation, but it also applies to the private sector. Private and public entities will need to protect themselves from privacy litigation. 

This law is much akin to the EU's data privacy laws.  Meaning, among other things, that scope of the law is extremely broad.  Additionally, all data is included, but certain types of data are given greater protection.  This Sensitive Personal Data includes: "In particular, consider those that may reveal sensitive issues such as racial or ethnic origin, health status, present and future, genetic information, religious, philosophical and moral, union membership, political views, sexual preference." (translated from the Bill).  The dissemination of any information that contains this sensitive data will require written consent from the owner of the data, the individual. 

Now the $1.5 million question:  What does this mean for my business?  The simple answer is: Potentially alot.  In the world of e-discovery and privacy litigation,this issue has already begun to rear its head in the context of the EU's data privacy law.  With the number of American manufacturers and companies with a presence and facilities in Mexico, this type of broad legislation could result in the expenditure of millions of compliance dollars to craft protocols and document retention issues.  Think of the billions of e-mails that must run through a Fortune 500 company.  Now think about how many of those e-mails contain some amount of information that fits within the category I described above.  To disseminate that information, each individual has to be contacted and give written consent.  Like I said, mind-boggling.  

Obviously, society is walking a thin line between protection of information and the availability of information for legitimate purposes.  Privacy litigation both here and abroad is going to shape the breadth and direction of that line.  And then, when we think we have a handle on it all, we'll start talking about what we are going to do under cloud computing law for that data that is stuck firmly in the cloud. 

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SaaS Law – Considerations When Developing B2B Business Models

Wednesday, June 2, 2010 by David Castor
Some B2B business models do well in targeting early stage customers (e.g., less than $5MM revenue) but have trouble scaling with customers as they grow.  Other B2B models cannot hit a price point for early stage customers and must target customers at later business stages. 

I recently saw a business model that concerned me on this point.  The SaaS application in the model was not cost effective for early stage customers – there are market alternatives that are offered for free that do just about everything early stage companies need.  The SaaS application was very efficient and effective for mid-stage, emerging businesses, but it was not as cost effective as other enterprise software licensing models after customers reached a certain size.  As a result, the business model comes in too late in the customer’s life cycle and then cannot scale with the customer beyond a certain point.  I think this will be a hard sell. 


See also:

Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
Entrepreneurial Law – Developing a Good Business Model – Part III
Entrepreneurial Law – Developing a Good Business Model – Part IV
Entrepreneurial Law – Developing a Good Business Model – Part V

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Business Law - I Am Spoiled

Friday, May 28, 2010 by David Castor
So I am at the office tonight, about 10 PM, working through several matters.  I have a software licensing contract which we are hoping to have signed by June 1 - I just finished and turned the revised draft.  I have a new SaaS law client that is embarking on a small private equity round - I am working on investment documents tonight.  A financial institution client contacted me this week and ask us to draft loan documents - so, working on those.  Have an independent contractor agreement for a business law client - working on that.  Sending e-mails regarding a stock deal and others regarding a real estate financing - all while listening to Pearl Jam on iTunes.

I continue to be very thankful for my clients.  Honestly, I am spoiled rotten that I have such great clients - good people in interesting industries doing fascinating things.  I often tell folks that my job is a lifestyle, not a job.  Today is one of those days where that definitely rings true.  10 PM and still loving what I do.






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Funding Law - Should You Look Out-Of-State?

Monday, May 24, 2010 by David Castor
Most business owners who are raising capital are willing to take capital from just about anywhere.  Investors are a means to an end of meeting capital requirements and scaling a business towards profit.  As Indianapolis is the “biggest small town in America” and the number of investors and amount of private investment capital is limited, certain business owners find looking outside of the state for capital is beneficial.  In my SaaS law practice, for example, I see a lot of companies look beyond state boarders.

I was back on the west coast this past week.  The key purpose of the visit was to meet with two clients on their open business law matters, but I also met with several private equity investors and two angel investor groups whom I know well to discuss potential private placement opportunities.

I found it interesting to hear from these investors what types of out-of-state deals they want to see.  Particularly, when are outside investors willing to look at Midwest deals and when do they feel it is best for those companies to raise capital locally?
 
For example, one open private investment opportunity is for a brewery.  It was interesting to hear investors state that an investment deal like this needs to be done with investors in their own back yard.  People don’t invest in beer businesses because of great returns – they invest primarily for the fun of being part of a brewery.  You can stop by, bring clients and co-workers, and enjoy the product. 

Also, when companies are branded locally (i.e., name of city or region in business or product name), out-of-state investors will be less likely to invest.  The brand sells that a target market is for that region – and the investor has little way to do the due diligence to assess the market opportunity.

Anyway, points to consider when considering out-of-state investors.

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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.   
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Build Your Business Model Around the 7 Deadly Sins?!?!

Thursday, May 13, 2010 by David Castor
I recently read a summary of a lecture on applying the seven deadly sins to software development.  The sins are:
 
Lust
Obsessive or excessive thoughts
Gluttony
Over-indulgence, over-consumption
Greed
A sin of excess like lust and gluttony, but in reference to wealth
Sloth
Laziness, indifference, apathy
Wrath
Uncontrolled feelings of hatred and anger
Envy
Resenting another because they possess something you do not
Pride
Excessive love of self
 

The idea is not to sell products leading to the sins themselves but to creatively apply the concepts of one or more to your software product to create an appeal and addictiveness factor to your product.  I wonder if the same can be applied when customizing a product / service for a new business or market opportunity. 
 
LustDo you touch a deep seeded relational need in people?
GluttonyDo you tie into a desire for comfort or consumption?
GreedDo you solve financial or monetary needs of your customers?
SlothDo you create efficiency or freedom of time for your customers?
WrathDo you provide a forum for dialog, debate or conflict resolution?
EnvyDo you provide customers a higher standard of living?
PrideDoes your product/service provide customers a sense of identity?



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Other posts that may of be interest

SaaS Law - Don't Use the Word "Affiliates"
Entrepreneurial Law - Proof of Concept and Proof of Scale
Good Metrics


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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. 

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