What Went Wrong with Fate Brewing Company

Photo Courtesy of Fate Brewing Company (Scottsdale, AZ)

Photo Courtesy of Fate Brewing Company (Scottsdale, AZ)

Earlier this month, Fate Brewing Company announced that they were changing their name to McFate Brewing Company.
Wait…what?! Is this awesome local brewery turning itself into some type of fast food brewery?
No, but they ran into a legal snag that forced the name change.

In 2012, Fate Brewing Company opened in Arizona. In 2013, someone else opened Fate Brewing Company in Boulder, Colorado. In legalese, the Fate Arizona is called the “senior user” of the name since they opened first and the Fate Colorado is the “junior user.” Despite being the junior user, Fate Colorado sued Fate Arizona for trademark infringement.

How Is This Allowed?
Easy: Fate Colorado registered the trademark “Fate Brewing Company” with the U.S. Patent and Trademark Office (USPTO). It’s the Burger King situation all over again.

By doing business first, Fate Arizona had rights to use “Fate Brewing Company” for beer and restaurant services, but since they didn’t register their trademark with the USPTO, their rights only extended to the geographic area where they did business. When Fate Colorado got their registered trademark, they obtained the exclusive right to use “Fate Brewing Company” for beer and restaurant services everywhere in the U.S. except where Fate Arizona had an established market. Likewise, Fate Arizona couldn’t expand its market beyond its established boundaries without infringing Fate Colorado’s rights.

I suspect Fate Colorado sued Fate Arizona for trademark infringement in part because their trademark was granted in 2013 and Fate Arizona South opened in 2015. Fate Colorado could have interpreted the new location as a market expansion that violated their trademark rights.

New Logo for McFate Brewing Company - opening June 25, 2016

New Logo for McFate Brewing Company, Photo courtesy of Fate Brewing Company

What’s Next for Fate Arizona?
Even though Fate Arizona could have made a legal argument that they had the right to use the name as the “senior user,” they have opted to take the high road to rebrand rather than spend hundreds of hours and thousands of dollars on this legal fight. The re-branding party for McFate Brewing Company (named after the owner, Steve McFate) is scheduled for June 25, 2016 according to Fate Arizona’s Facebook page.

I hope Fate Colorado wasn’t a jerk about this process. A company has an obligation to protect its intellectual property or risk losing it, but there is more than one way to pen a cease and desist letter.

How Could Fate Arizona have Avoided This Problem?
Yes. Fate Arizona could have beaten Fate Colorado to the USPTO and filed a trademark application before they did. They could have staked their claim to the name and gained exclusive right to use the name nationwide, shutting down Fate Colorado or forcing them to rebrand from their start.

Many new businesses are more concerned about getting off the ground than federal trademark filings, especially when the business only has aspirations of being a local brand. Unfortunately, this leaves them vulnerable to being boxed in geographically, called into court, or forced to rebrand like it did here.

If you have questions about your company’s trademark or how to select a trademark for your new venture, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.

Creeper Cosplay Video | Is That Legal

Gradisca Cosplay Photo Contest 2014 by chripell from Flickr (Creative Commons License)

Gradisca Cosplay Photo Contest 2014 by chripell from Flickr (Creative Commons License)

A contact at Phoenix Comicon sent me a link to an amateur video from this year’s event. Apparently it’s feuled quite a bit of discussion regarding the legalities of shooting video at pay-to-attend events.

My initial thoughts about this video: It’s creepy.
This guy knowingly and intentionally videorecorded women without their consent and posted the compilation online in a way that objectifies them. It’s all about their bodies. Did you notice he taped at least one woman while she was walking away from the bathroom? Eww! And what’s with that disturbing music with women crying on it? This guy is right up there with creepy yellow coat man from the 2010 No Pants Light Rail Ride.

What made this video so disturbing? Greg Benson of Mediocre Films does videos of women in cosplay at San Diego Comic-Con and I’ve never had an issue with it. I watched one of his videos from last year for comparison:

I don’t have an issue with this video for several reasons:

  • He obviously gets consent from the women to film them. There’s no hidden agenda.
  • He interacts with these women. Even when he’s enjoying the beauty around him, Greg treats these women like people, not a peep show.
  • The video has a dual purpose – one of which is showcasing these stunning costumes. (Hey Greg – if you do another video like this, would you please call it “Women of Comic Con” instead of “girls?” It’s a better embodiment of these women’s badassery.)

So is Creeper Guy’s video from Phoenix Comicon illegal?
Probably not – at least based on the footage posted. It’s not illegal to be a jerk.
If he had a ticket to the event, he wasn’t trespassing. The polite thing to do at a con is to ask permission before taking photos of attendees, but it’s not required.  He could have been a guy walking around looking like he was shooting general footage of the event, which lots of people do.

So far he’s not running ads on the video in question, so he’s not publicizing anyone’s image without permission. Phoenix Comicon is an event that’s open to the public to attend so there’s no expectation of privacy on the expo floor.

Is what this guy did vile? Yes.
Should he be banned from future Phoenix Comicon events? Perhaps, but that’s not my call to make. With a crowd of over 80,000 in attendance, it would be easy for someone to slip in.

However, instead of dealing with this situation from purely a legal perspective, I encourage the community to be aware of creepers at events like Phoenix Comicon. If you see someone leering at others or doing vulgar things like filming people’s asses as they walk, call them out and/or report them to event security. If you see someone being harassed, report that too and support that person. We have an obligation to keep an eye on each other.

There’s nothing wrong with enjoying the view, as long as you can do it appropriately. Remember, cosplay is not consent.

This is an issue impacting the entire geek/con community. If you believe you are the victim of a crime at a con, contact law enforcement for assistance. If you have questions about social media law or internet privacy that you want to discuss with me, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.

Starting a Comic Book – What Does it Cost?

Atom vs. Ant-Man (334/365) by JD Hancock from Flickr (Creative Commons License)

Atom vs. Ant-Man (334/365) by JD Hancock from Flickr (Creative Commons License)

I had the privilege of doing two panels at Phoenix Comicon this year: Fan Art/Fiction and Fair Use and Comic Book Creator Rights. The latter was a panel with writer/artist Josh Blaylock. He has experience licensing others’ work and creating his own.

Someone in the audience asked us how much a person should set aside to cover legal fees when starting a comic book.

Create Quality First
If your goal is to create a comic book and possibly a business from it, start by working on your craft. You won’t have any legal issues if no one cares what you’re making.

Start with a Consultation
When you’re ready to take your work from a hobby to a professional endeavor, schedule a consultation with a lawyer. Choose someone with experience in entrepreneurship and intellectual property – business formation, copyright, contracts, and trademarks. You need someone who can help you understand when you need a lawyer. Expect to pay $200-350/hour for a lawyer’s time, more depending on where you live and the person’s experience level.

It doesn’t cost much to get started with a new venture, but you do want to be thoughtful about what you can afford and act accordingly. A good lawyer will respect your budget and tell you what you can do on your own, and when it’s imperative to hire a lawyer. For instance, in many states, it’s easy to file your own business entity. Check with your state’s corporation commission for instructions and the forms. In Arizona, you can file an LLC and complete the requisite publication for less than $100.

Nuts and Bolts information by Josh Blaylock

Nuts and Bolts information by Josh Blaylock

Protect your Intellectual Property
The most valuable asset in your work is your intellectual property. Before you fall in love with a name for your comic book, run a search on the USPTO trademark database to verify that someone else hasn’t claimed the same or a similar name. Even if you can’t afford the $225-325 filing fee to register your trademark at first, you can put a superscript “TM” next to your work’s name, logo, and anything else you claim as a trademark. The USPTO has videos about how to submit a trademark application if you want to try to file your own, but I usually recommend that clients have a lawyer shepherd their application through the process. If you want to do this, expect to pay an additional $1,000 for their time.

In regards to copyright, I tell my clients, it’s not if your work gets stolen, but when so plan accordingly. For a new comic book creator, my recommendation is to register each edition with the U.S. Copyright Office. Their website is not the most user-friendly experience, but you can hire a lawyer for an hour to walk you through your first registration and then you can submit your subsequent copyright applications by yourself. The filing fee for a single work is $35-55.

Manage Relationships with Contracts
Every relationship related to your business should be documented with a written signed contract. This applies to co-owners of your business, writers, artists, colorists, licensors, licensees, vendors, and if your comic book turns into a job offer, your employment contract. Contracts are relationship-management documents. They keep everyone on the same page in regards to expectations, compensation, ownership, and they provide a course of action if there is ever a dispute. A contract is an investment and worth the cost to hire a competent lawyer to write or review your document to ensure it is effective for your needs.

Additionally, every entrepreneur should watch the video Fuck You, Pay Me, featuring Mike Monteiro and Gabe Levine. They have excellent advice for all entrepreneurs, especially those who work in creative services.

If you want more information about the nuts and bolts of starting a comic book, check out Josh Blaylock’s book How to Self-Publish Comics: Not Just Create Them. If you want more information about the legalities of starting a business or working in the creative arts, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that’s shared only with my mailing list, by subscribing to the firm’s newsletter.

Checklist for Social Media Influencers

Selfie Stick by R4vi from Flickr (Creative Commons License)

Selfie Stick by R4vi from Flickr (Creative Commons License)

Some people, including a lot of average joes, have such a strong social media following that brands want to send them free products to review or to partner with them for a native advertising campaign. If you are lucky enough to get such an offer, you need to understand the rules and read the fine print closely to make sure you’re not setting yourself up to be accused of an FTC violation. Don’t count on the other side to educate you. As we saw in the Lord &Taylor situation, companies who seek to partner with social media influencers don’t always know and follow the rules themselves.

If I were presented with an offer to do a product review or be part of a native advertising campaign, these are some of the questions I would ask in regards to the offer.

Influencer-Company Relationship
What is the company asking me to do?
What is the company giving me in return?
Is there fair give-and-take between both sides? (If not, it’s not a valid contract.)
Are expectations and deadlines clear?
Who is my point person at the company if I have any questions?

FTC Compliance
Does the offer require that my review be truthful?
Does the offer require me to give an accurate review of the product? (Bonus points for companies that require reviewers to write what they like and dislike about the product.)
Does the offer require that me to disclose my relationship with the company – both in my review itself and also any promotions I do about the content on social media (i.e., use #ad or #sponsored)? (The FTC requires this so if the company doesn’t want you to do this, turn and run. They don’t know the basic rules about native advertising.)

Intellectual Property
Does the offer clearly state who owns the copyright in what I create under the agreement?
By accepting the offer, do I grant the company certain rights to use my work?

General Legal Provisions
Is there a written contract? (It’s avoids confusion when all the provisions are in a single document and has  provision that states, all the terms of this agreement are in this contract.)
Is there a severability clause so if one provision is illegal, the rest of the contract remains in place?
What are the rules for modifying the agreement?
Which state law governs the agreement?
If there’s a problem between the company and me, how will we resolve it?
Under what circumstances will the agreement be terminated?

Final Words of Wisdom
Contracts are relationship-management documents, ideally written to protect both sides. If a company offers me a contract with provisions I dislike, I request changes. (I’m the queen of changing liability waivers.)

And if there’s a word or provision you don’t apprehend, ask! Don’t sign a contract that you don’t understand, because as long as it’s legal, you’re stuck with it.

If you are a serious influencer and get offers to do product reviews or participate in campaigns, treat your social media activities like a business. Consider hiring a lawyer to create a contract template for these situations when the other side doesn’t have a written contract. At the least, use this checklist to do a preliminary review of the offers you receive.

If you want more information about the legal rules regarding your blog and social media, please check out The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. If you want to chat with me about social media law, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that’s shared only with my mailing list, by subscribing to the firm’s newsletter.

The Paisley Dress and the FTC: A Cautionary Tale

Lord & Taylor by Mike Mozart from Flickr (Creative Commons License)

Lord & Taylor by Mike Mozart from Flickr (Creative Commons License)

If you want a story of what not to do when it comes to working with influencers and the Federal Trade Commission (FTC), look to Lord & Taylor.

To promote their new clothing line collection, Design Lab, Lord & Taylor sought out influencers on Instagram. They sent a piece from the collection – a paisley dress – to 50 influencers, and paid each of them $1,000-4,000 to post a picture of themselves wearing the dress on a specific day (“product bomb”). The agreement with each influencer was that they would use certain campaign designations and hashtags and that Lord & Taylor would review and approve these posts prior to the product bomb day.

The Infamous Paisley Dress

The Infamous Paisley Dress

This is where this story hurts my head:

  1. Lord & Taylor didn’t require the influencers to disclose that these posts were part of a campaign.
  2. When Lord & Taylor reviewed each post, they didn’t insist that the influencers add this information.
  3. None of the 50 influencers who were paid to post a picture of themselves wearing the paisley dress included the disclaimer or asked about it.

How can marketing professionals claim they’re competent at creating social media campaigns and not know about the basic FTC rules about native advertising?

How can an influencer who wants to use their social media platforms as a business and not know the basic rules of the game? The rules are not hard to follow:

  • Only give your truthful and accurate review of products, and
  • Always disclose when you have a relationship with a company.

If a company doesn’t want you to do this, send them a link to the FTC rules and run away as fast as you can. If they don’t understand these basic rules, they don’t know what they’re doing. I’d be worried about what else they’re doing wrong.

Companies should insist on these disclosures. When I did product reviews, my contract required me to include what I liked and didn’t like about the product and to always disclose that I got to use each product for free.

Luckily for Lord & Taylor, they appear to have gotten off with a warning. The FTC could have fined them or their influencers up to $11,000 per violation ($11K x 50 influencer posts = $550K). The next company that makes this mistake may not be so lucky.

I’m looking forward to speaking on this topic at BlogPaws to help bloggers avoid getting in hot water. If you want to talk with me about the FTC rules and social media law, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content, entrepreneurial tips, and rants that are available only to people on my mailing list, by subscribing here.

 

Copyright Protection – Ideas vs Expression

Golden Gate Bridge by Julian Fong from Flickr (Creative Commons License)

Golden Gate Bridge by Julian Fong from Flickr (Creative Commons License)

A common mistake among professional creatives and amateur is understanding the scope of copyright protection, In the U.S., when you have a copyright, you have protection for your original expression, not the ideas contained within your work.

What Does Copyright Protect
Copyright applies when you have an “original work of authorship” that is “fixed in a tangible medium.” When you have a copyright, you can prevent others from using or claiming your work without permission, but it doesn’t give you a monopoly over the ideas contained within a work.

The image above is a photograph of the Golden Gate Bridge by Julian Fong. By taking this photo, he has the copyright in the image; however, he can’t stop others from taking picture of the bridge. If I went to San Francisco and determined where he was standing, I could take a photo that is nearly identical to his, but that is not a violation of his copyright. He can only stop me from claiming his work as my own or using his work without his permission. He can’t stop me from creating my own picture. His rights only extend to his exact expression, not the idea of capturing an image of this bridge on a sunny day.

The same rules that apply to images also apply to written material. This is why multiple people can write about the same topic and even express similar sentiments without risk of violating the other’s copyright rights. As long as one writer is not deliberating copying the other’s work word-for-word and claiming it as their own, it’s possible for two people to create similar works without violating the other’s rights. It is permissible under the concept of fair use to quote another writer and provide your own thoughts and others’ perspectives about the issue.

What Is Not Protected
Copyright only protects original expression, it does not protect facts, ideas, methods, titles, names, short phrases, or recipes. Copyright can protect and original arrangement of facts, but not when it’s an unoriginal arrangement. That’s why a cookbook may be protected by copyright (original arrangement of recipes and images) but a phonebook is not.

I regularly receive questions from people about what is the scope of copyright protection and whether contributing to a project (such as being the subject of a photo) gives them rights in the resulting product. Copyright, like many areas of law, has few definite answers. Each situation must be evaluated based on its merits.

If you want to talk with me about copyright law and protecting your rights, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content, entrepreneurial tips, and rants that are available only to people on my mailing list, by subscribing here.

Planning for the Digital Afterlife

Candlelight Vigil 6 by B. W. Townsend from Flickr (Creative Commons License)

Candlelight Vigil 6 by B. W. Townsend from Flickr (Creative Commons License)

Your accounts on websites and social media platforms, website domains, and all the content you post are your property, and therefore part of your estate.  When you pass away, your estate plan determines who will inherit your possession, including your property online. When you write your will, make sure it includes information about who will own your online content when you die.

Copyright Ownership
Under the U.S. Copyright Act, you are the copyright owner in any original works you create the moment they are “fixed” in any tangible medium (including digital files). This includes the photos and videos that you take post on social media and the content you create and post on your websites. For any individual, the copyright in each work does not expire until 70 years after you die. It’s important to designate who will be the copyright owner for your content.

Maintain Accounts
You may have accounts that require payment to maintain them – such as your web domains. Your accounts could be disabled or delete if they are not maintained, meaning the content could be lost if someone doesn’t continue to pay your domain, hosting, and account fees. If you want a website to live on after you pass away, include instructions and money for doing so.

For your other social media accounts, check with each site’s terms of service about what happens to an account when a user passes away. There may be processes in place to transition your account into a memorial page and/or transfer control to your loved ones.

Settling your Online Affairs
When you create an estate plan, you designate an executor or personal representative for your estate who is responsible for settling your affairs. Consider designating a representative to oversee you online affairs. Provide a list of your online property and instructions regarding what should happen to it. You may also want to give this person instructions regarding the files on your computer, in your phone, or in the cloud.

You may select one person as your regular personal representative and a tech savvy friend to address your online affairs. Your online executor may need access to your passwords to your computer, phone, and for each account. (This is when using a password storage system like LastPass is handy.) Your online executor is also the best person to clear your browser history, delete images from your machine, and possibly remove items from your home that you don’t want your family to see.

Dying Without a Will
If you die without an estate plan (aka die intestate), you’ll have no say over who inherits what from your estate. The court will appoint a personal representative and the laws of your state will determine who inherits your estate. In Arizona, if you die without a will, your spouse inherits your estate. If you don’t have a spouse, your children inherit your estate. If you don’t have a spouse or children, your parents inherit if they are living, otherwise your property goes to your then-living siblings. If you are an entrepreneur, you should also be aware of what happens to your LLC when you die.

If you want to talk with me about who owns your online content now and in the afterlife, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content, entrepreneurial tips, and rants that are available only to people on my mailing list, by subscribing here.

Stolen Images: How to Respond if Someone Uses your Photo Without Permission

Caught in the Act by *sax from Flickr (Creative Commons License)

Caught in the Act by *sax from Flickr (Creative Commons License)

What should you do if you discover that someone is using a photo you took without your permission? As the person who took the photo, you are likely the copyright owner, which gives you the right to control where and how your work is copied, distributed, displayed, and used in other works. You may have grounds to sue the person for copyright infringement, but that’s often not a practical course of action, especially if your damages are minimal or the alleged infringer doesn’t have means to pay you the damages.

In many cases, the owner simply wants the person to stop using their image, so what do you do? If your goal is removal of the photo and cessation of further uses, this is one way to proceed.

1. Dial Direct: Contact the suspected infringer directly, inform him/her of your concerns, and request that they remove the image. Many people still believe that they can use any image they find on the internet as long as they give an attribution and a link to the original.

Look for contact information on their website if that’s where the alleged infringement is occurring. If that information is not available, it might be listed on WhoIs from when the person registered the domain.

2. Send a DMCA Takedown Notice: If you can’t contact the person or they don’t respond to your request to remove your image, you can send a DMCA takedown notice to the company that hosts their content. If the image is on a person’s website, be aware that the company that registered the domain is not necessarily the same company that hosts the site. Before I send a DMCA takedown notice, I usually contact the hosting company and verify that they host the site in question. I also ask if there’s a specific email address to use to send DMCA notices or if they have a form on their site for submitting them.

The downside of sending a DMCA takedown notice is that it may result in the image being removed, but only for a short time. The infringer can have the content restored to their site merely by sending a counter takedown notice.

3. Consider the Court or the Court of Public Opinion: If sending a DMCA takedown notice is not effective, you may have to sue the person to get the image removed from their site or account. You may also consider turning to the court of public opinion. If you pursue the latter option, be careful about what you say. You don’t want this person to have grounds to sue you for defamation, false light, or a similar claim.

If you’re interested in seeing an epic copyright battle that was fought in the courts and the public eye, I recommend The Oatmeal vs. FunnyJunk. Be sure to read this update, this one, and this one too.

Of course if you’re in this type of situation, it’s best to consult a copyright lawyer to determine the best course of action based on your specific circumstances. If you want to talk with me about copyright issues, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content, entrepreneurial tips, and rants that are available only to people on my mailing list, by subscribing here.

Why Don’t Lawyers Have Empathy?

Shark Car Ornament by  peggydavis66 from Flickr (Creative Commons License)

Shark Car Ornament by peggydavis66 from Flickr (Creative Commons License)

One of my entrepreneurial friends recently asked me this question. He works with lawyers in various aspects of his life. He previously asked me, “Why are you the only lawyer I like?” His most recent question made me ponder if and how empathy plays a role in the practice of law.

We Do Have Empathy
Good lawyers do have empathy for their client’s situation. I respect that my clients are often angry and scared. Their livelihood and sense of security may be on the line. I get that. Effective lawyers get that. If nothing else, it shows that we respect our clients’ perspective on the situation.

However, the fact that we don’t commiserate with you doesn’t mean that we don’t care. The client will always be more emotionally invested in the can that the lawyer. That’s partly why you hire us – we’re more clearheaded and able to attack the situation logically, rather than feed our client’s anger and desire for revenge.

We’re Professional Problem Solvers
If you hire a lawyer, you’re paying us to fix or prevent a problem. At our core, that’s what we do.

When you’re dealing with a legal problem, there’s always a chance you could lose. By hiring a lawyer, you’re betting that the odds of getting the outcome you want are better than if you hired someone else or tried to handle it yourself.

It may seem like we don’t care if we’re not empathetic all the time, but at the end of the day, that’s not what you hired us to do. If we’re putting time and energy into validating your feelings, that’s time and energy we can’t put towards actually addressing the problem you hired to fix.

It’s Not our Job to be Nice
Sometimes we have to say things to our clients and prospective clients that they don’t want to hear, things like

  • I don’t think you have a case.
  • That’s not how the law works.

One of the reasons why the world needs lawyers is because the law is not black-and-white. If the answers were easy to find or resolution easy to achieve, people wouldn’t need lawyers to solve their problems. Sometimes the situation involves bad choices by on people on both sides of the dispute. I don’t tell my clients that they fucked up, but often times, lawyers are hired to deal with preventable problems. I don’t shame my clients for their choices – everyone makes mistakes – but I try not to sugar coat it either.

We’re lawyers, not miracle workers. We have to play the hand our client gives us.

We’re Saving You Money
One of the challenges of being a lawyer is the fact that we work and bill by the hour. I work in an eat-what-you-kill environment, so if I’m not billing, I’m not earning income. I take pride in the fact that I respect my clients’ budgets, but that means I have an obligation to work efficiently.

If a client wants to have an empathy session, that’s fine, but I have to schedule and bill them for it. On most days, I have a to-do list of projects related to multiple client’s cases and I have as much of an obligation to do quality work for each one.  That’s why when I’m in the middle of working on work for a client, I won’t take calls because the distraction will impact my work for both clients, which will force me to take longer to complete my tasks for them.

This question spawned some interesting conversation among my fellow legal eagles. It’s good to know that most lawyers I encounter seem to be thoughtful about this issue. If you want to hear more of my perspectives about being a lawyer, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content, entrepreneurial tips, and rants that are available only to people on my mailing list, by subscribing here.

Know the Fine Print – Dispute Resolution

Fine Print by CJ Sorg from Flickr (Creative Commons License)

Fine Print by CJ Sorg from Flickr (Creative Commons License)

Every contract needs a dispute resolution clause – every contract. It’s something you should look for in every contract you read. If you’re given a contract to sign that doesn’t have one, I strongly recommend adding one in. That’s what I would do.

The dispute resolution clause in a contract is the how-we’re-going-do-deal-with-problems provision. It lays out how and where problems will be resolved when they occur.

How Problems will be Resolved
There are three main ways people general resolve problems in a contract:

  • Mediation: Hire a mediator to help you resolve the problem – more likely to results in “splitting the baby” and not a winner and loser.
  • Arbitration: Hire an arbitrator (or panel of arbitrators) to hear/review your arguments and make a decision. (This is what they used in Erin Brockovich.) Sometimes arbitration is faster and more cost effective than litigation, but not always.
  • Litigation: This is the traditional civil lawsuit. This is what I recommend for most contracts I write for clients.

You’re not limited to only these three options. You can have anything in your dispute resolution clause as long as it’s legal. So if you want to resolve disputes by throwing darts or Rock-Paper-Scissors-Lizard-Spock, you can.

Where Problems will be Resolved
The dispute resolution clause should specify in which county and state disputes will be resolved. If you’re writing the contract, you want the opposing party to have to fight you on your turf if there’s a problem. This is why most contracts I write for clients require them to resolve all disputes in Maricopa County, Arizona and that all parties agree to that jurisdiction. Without such a provision, you may find yourself having to travel to fight disputes in the opposing party’s state, and possibly needed to employ a local lawyer for additional assistance.

Which Law Applies
The laws in each state are slightly different. This is why it’s imperative that your contract state which state’s law will govern the contract for all non-federal claims. Federal claims (like many intellectual property issues) are governed by federal law. You don’t want to have a dispute within the dispute about which law applies to the state-law claims.

There may be other provisions in the dispute resolution clause like a requirement to notify the other party in writing if you believe they’ve breached the agreement and a set time in which they have to cure/fix it before you can take further action against them. Another clause to look for is a provision that requires the loser in a dispute to pay for the winner’s attorney’s fees. I like to add this into contracts I write. It makes people think twice before going after the other.

Next time you buy a ticket for a show, professional sports, travel, or sign up for an account on a website – read the fine print. See what the dispute resolution clause requires. You’ll quickly see that whoever writes the contract, does so with their (or their client’s) best interests (not yours) in mind.

If you need help writing or reviewing a contract, speak to a business lawyer about your needs and options. If you have questions about contracts that you want to discuss with me, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.