Thoughts About Effective Contracts

August 5, 2014 by 2 Comments
Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Signing Paperwork by Dan Moyle from Flickr (Creative Commons License)

Some people think contracts are intimidating and others find them mind-numbingly boring. In general, I like working with contracts. I know this makes me sound like a big dork, but it’s true. I get to help my clients protect themselves and write for a living – two things I enjoy.

When it comes to contracts, some clients hire me to review an existing contract and some hire me to draft a contract from scratch. Here’s one thing I learned in law school and have verified to be true in practice: the person who writes the contract, does so in the best interest of their client. So when you read a contract, think about which side wrote the first draft because I will guarantee it’s biased in their favor.

For example, I’ve written plenty of contracts for situations where a business hires an independent contractor to work on a project. The contract verbiage can be very different when I’m representing the business than when I’m representing the contractor. This is why a lot of lawyers want to be the side that writes the first draft of a contract because they want to write in their client’s favor and negotiate from there.

Recently, I’ve worked on a few contracts that reminded me how important it is to still be reasonable when writing contracts. If your contract template is too biased in your favor, or doesn’t give the other side any sense of security in the relationship, you may have a hard time finding people who are willing to sign it.

I’ve seen this in particular to contract provisions about changing or terminating a contract. There are times, like when you’re a long-term service provider, where you need to be able to change the terms of the original agreement to reflect changes in the industry, your services, or your rates and it would be bad business practice to let the customer change the agreement. In some circumstances, the contract says that the provider can make any changes at any time and if the customer doesn’t like it, they can take their business elsewhere – very take it or leave it. Other times, it’s prudent to specify under what circumstances changes will be made, how much warning the customer will have prior to changes going into effect, and how that notification will be delivered.

I prefer to think about contracts as relationship management documents.   When you’re writing or reviewing a contract, think about the expected lifespan of your relationship with the other side and how you want to feel about that relationship at the end of the day. And remember that contracts are binding documents so it’s important that your contracts reflect your needs and protect your interests. This is one of the times where it’s important to make sure you have an accurate document before you sign it because you may not be able to change it later if you realize after the fact that you’ve made a mistake.

If you want to chat more about contracts, you can connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

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What Are You Buying When You Use an Independent Contractor?

July 22, 2014 by 3 Comments
Photographer Dan by Kevin Dooley from Flickr (Creative Commons License)

Photographer Dan by Kevin Dooley from Flickr (Creative Commons License)

I get questions all the time from people involved in situations where a business outsources the creation of their website, marketing materials, or other photography work about who owns the copyright in the final work product and what can the other side do with it. And I get these questions from people on both sides of the relationship – the hiring company and the artist.

In these situations, my first question is always, “What does the contract say?” Under the U.S. Copyright Laws, if you hire a third party to do your graphic design, photography, or similar work, the artist owns the copyright in whatever you’ve hired them to create unless you have a written and signed contract that says you will own the copyright in the final product. A lot of business owners don’t understand this. They think they automatically get the rights in whatever they’ve hired someone to create just because they’ve paid for it. And that’s not true. Without an explicit contract that says they own the copyright, the artist owns it and the business has an implied license to use it.

Look at it this way – if you buy a poster for your office, you’re only buying the print. You don’t get the copyright with it. You can decide where you’re going to hang it or if you’re going to get rid of it, but you can’t make copies of it and sell them. Likewise, if you hire someone to do photography work for your website, you’re only buying the digital images, not the copyright in them. If you wanted to do something else with the images, you would need the photographer’s permission. If wanted to buy the rights, you could do that, but expect to pay extra.

There are many artists who write their contracts to say that the business hiring them owns the copyright in whatever they’ve hired the artist to create once they’ve paid their bill in full. That means if the client hasn’t paid their bill, they don’t own the rights to the work product, and the artist has rights to remove it from the client’s website if the client is using it without complying with the terms of the contract. I recently had a discussion with a website designer about modifying her contract template to explicitly state that she can and will shut down the client’s website if they are using her work and they haven’t paid the balance owed to her.

Here’s a video I did on additional issues you want to consider if you are or working with a third party contractor.

If you are a third party contractor or working with one, please read your contract carefully. This is the document for managing your relationship, including who owns the final work product and what happens if a problem arises. If you have contract templates in your work, make sure a skilled business and intellectual property attorney reviews them before you use it, because otherwise you may be stuck with terms that you don’t like.

If you want to chat more about working with contractors, copyright, and/or contracts, feel free to connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Intellectual Property, Photography & the Law Tagged With: , , , , , , , , , , ,

Intellectual Property in Comic Books

June 12, 2014 by 3 Comments
Comic Books by Sam Howzit from Flickr (Creative Commons License)

Comic Books by Sam Howzit from Flickr (Creative Commons License)

I had the pleasure of presenting on Comic Book Creator Rights with the award-winner comic author Mike Baron at Phoenix Comicon last weekend. We talked about how important it is for writers and artists to understand what rights they have in their work and the various ways they can protect it.

Copyright
An artist or writer has copyright rights in their work the moment they put fingers to keyboard or pen to paper. As the owner of their work, they can control where their work is copied, distributed, displayed, performed, and what derivative works can be made.

Unlike books where a complete story is often contained in a single volume, a comic book story may be broken up into several 22-page issues. One thing Mike and I suggested to our audience was registering the copyright in the “story bible” as well as each issue that the artist creates. A story bible is a master document that lays out the setting and norms of that universe and the backstory and characteristics of each major character.

The copyright laws regarding infringement for published and unpublished works are different, and under the current laws (that are in need of overhaul), a work that is released only online is “unpublished.” To maximize your options for recourse (i.e., financial damages), I advise artists to register their work with the U.S. Copyright Office before they release it if it is unpublished. Mike also suggested doing a short run of each issue so the work will qualify as “published” and the rules about when you have to register to be eligible for what’s called statutory damages are more favorable.

Trademark
A comic book artist could have several trademarks related to their series – the name of the series, logos, slogans, and the name and possibly depiction of the characters. Any or all of these could be trademarks used to market the artist’s work.

For each of these potential trademarks, it’s a good idea to run a search on the U.S. Patent and Trademark Office’s (USPTO) trademark database to make sure that another artist doesn’t already have the exclusive right to use that trademark in relation to comic books or similar products. If they do, they can force the other person to rebrand.

If the desired trademarks are available, putting a superscript “TM” next to them will put everyone on notice that the artist is using them as trademarks, not just elements in their series.  Registering them with the USPTO will increase their value and give the artist the exclusive right to use those trademarks. No one else in the industry could have the same trademark in the U.S. Registration also increases their value and may make the artist’s work more desirable if their goal is to be acquired.

Identifying and creating a strategy to protect your intellectual property is complicated, so if you want to talk more about this subject, feel free to  connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Geek Law, Intellectual Property Tagged With: , , , , , , , ,

How to Avoid Being the Next Social Media Horror Story

May 28, 2014 by Leave a Comment
Be A Social Media Super Hero for your Company - "Super Heros" by 5chw4r7z from Flickr (Creative Commons License)

Be A Social Media Super Hero for your Company – “Super Heros” by 5chw4r7z from Flickr (Creative Commons License)

I had the pleasure of presenting Social Media Horror Stories (and How to Avoid the Same Fate) at the Arizona Technology Council Lunch and Learn this week.  For those of you who weren’t there, I got to tell the stories of major missteps companies and individuals have committed with their social media activities and how to avoid the same mistakes. In every situation, the problems could have been avoided or mitigated with proper education, forethought, and applying common sense.

This is my recommended follow-up plan for attendees:

Register Your Trademarks
To avoid problems with your competition, register the name of your company, products, blog, logo, and/or tagline with the U.S. Patent and Trademark Office. Without registration, the law only protects your right to use your trademarks in your established geographic market (which can be challenging to discern when your business is 100% online). You don’t want to find yourself in the Burger King situation where your market is limited or the Turner Barr situation where your business is essentially shut down because someone else registered your mark.

Before you launch your next company, product, or marketing campaign, be sure to check the Trademark Office’s database to make sure that someone else doesn’t already have the exclusive rights to use your desired trademark.

Check Your Contracts
If you outsource any of your content creation or marketing activities, review your contracts carefully. Look for information about who owns the social media accounts and any content created on your behalf. Also look for provisions that address potential problems and whether you will be indemnified if you’re sued or get in trouble because of something a third party did on your behalf.

Remember that website terms of service are also contracts. Make sure you understand the implications of using a social media platform or web-based service. Your site may also have terms of service that manage your relationships with your users. Make sure they’ve been written to suit your needs.

Be Careful About Copyrights
When a person owns a copyright in text or an image, they have the exclusive right to control where they work is copied, distributed, and displayed. If you want to use their work, you often need to obtain permission or risk being accused of copyright infringement.  I frequently see people pulling images from search engine results without considering the artist’s rights. Many people think they can use whatever they want as long as they give an attribution and link back to the original, and that’s just not true. If you’re looking for images for your site, consider using Creative Commons. I always use images that come with the license that allows me to modify and commercialize the artist’s work.

When it comes to your own copyrights, decide in advance how you want to react when someone steals your work and plan accordingly.

Check Your Social Media Policy
I’m an advocate for the idea that companies should generally leave their employees alone when they’re on their own time, including what they do on social media. However, I’m also a huge proponent of the idea that every company needs a social media policy. Employees need to understand what their dos and don’ts are when it comes to their personal profiles and blogs, and employers need to understand that their social media policy needs to comply with the National Labor Relations Act. If your policy prohibits employees from saying anything damaging about the company online, it’s likely illegal and if you fire someone for violating an illegal policy, you could easily face tens of thousands of dollars in legal fees and damages. This is an area of law that is still developing, so please have  lawyer help you write your policy so it complies with the law.

Review Your Crisis Response Plan
For most companies, the question isn’t if it will face a crisis, but when. Every company should have plans in place for dealing with expected problems, including pre-writing content for the media and social media, so what when an problem occurs, everyone knows what their role and the protocol that everyone will be following. When you’re having your planning sessions, it’s a good idea to have your legal counsel present to assist from a legal perspective.

If you want a resource for you or your staff regarding the legalities of social media, please check out my book, The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. If you’re interested in guerilla marketing, my book on Flash Mob Law will be available on Amazon in June 2014.

If you want to talk more about social media law, you can connected with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Featured Post, Intellectual Property, Internet law, Legalities of Blogging Tagged With: , , , , , , , ,

Truth in Advertising – Deceptive Word Choices can be Costly

May 21, 2014 by Leave a Comment
My Vibram Fivefingers by Lavender Dreamer from Flickr (Creative Commons License)

My Vibram Fivefingers by Lavender Dreamer from Flickr (Creative Commons License)

I’m sure you’ve heard about the class action lawsuit that claimed that Vibram misrepresented how its FiveFingers shoes benefited consumers’ health.  In the settlement, Vibram offered to provide a refund to any purchaser who requests it. Vibram created a site about the settlement that will provide information, including how to file a claim if you qualify.

Unfortunately, cases like this are not uncommon. I saw a similar article in the Wall Street Journal last week where Proctor & Gamble (makers of Crest) sued Hello Products for false advertising when Hello put a claim on its toothpaste that said the product was “99% Natural.” Hello was forced to remove ~100,000 tubes of toothpaste from store shelves, change the claim “99% Natural” to “Naturally Friendly,” and pay “six figures” for legal fees related to this case.

So how do you avoid these problems? It’s pretty easy – just be truthful.

Federal rules about truth in advertising require that all your advertisements be “truthful and non-deceptive.” If you make any claims, you must be able to back them up with evidence. If you have endorsements, they must be truthful and accurate, and you must disclose when a person is compensated for giving their opinion. (This includes getting free products.)

If you violate these rules, you might receive a cease and desist letter from your competition or the Federal Trade Commission which is tasked with protecting consumers. You could also be fined by the FTC, be sued for unfair competition and/or false advertising by another company, and/or face a class action lawsuit from consumers who claim that they were deceived into buying your product.

When you are working on your marketing campaigns, be careful that your marketing team doesn’t create content that crosses the line from mere puffery into false advertising. If you haven’t done so yet, review the FTC’s Truth in Advertising website.  They have useful information about required disclosures, using endorsements and testimonials, and making health or “green” claims about your products. If you have legal counsel, consider inviting them to your marketing meetings or at least have them review your materials to make sure that your team doesn’t inadvertently cross the line into false advertising.

If you want to talk more about truth in advertising, you can connected with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. There’s also a chapter dedicated to endorsements and blogging in my book, The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law Tagged With: , , , , , , , , , , ,

How to Move an LLC to Arizona

April 29, 2014 by Leave a Comment
New Aduafruit Office - Moving In by Becky Stern from Flickr (Creative Commons License)

New Aduafruit Office – Moving In by Becky Stern from Flickr (Creative Commons License)

It’s not uncommon for people to move from state to another. If you’re a business owner with an LLC, you have to deal with the question of if and how you should move your business to your new state.  There are four main ways to move an LLC to a new state.

Option #1: Maintain your LLC in your Old State and Register as a Foreign LLC in your New State.
This is a particularly good option if you plan to continue doing business in both your old state and your new state.  You will have to file state taxes in both states and you may have to file an annual report in your old state. (Arizona LLCs don’t have to file annual reports with the Arizona Corporation Commission.)

Option #2: Close your LLC in your Old State and Open a New LLC in your New State.
You’ll have to dissolve and liquidate your old LLC and start a brand new LLC in your new state. Filing paperwork for an Arizona LLC is fairly straight-forward, but a bit redundant to put the same information on each of the forms. If you have a single-owner LLC, the process mainly involves closing the bank accounts for the old LLC, filing the proper paperwork with your old state, filing the old LLCs final taxes and starting anew by filing LLC paperwork in your new state and opening new accounts for the new LLC.

Option #3: Create an LLC in your New State and have each Member Transfer their Ownership Interest from the Old LLC to the New LLC.
LLCs are owned by Members. (I encourage all my clients to create manager-managed LLCs where every manager is a member but not every member is a manager). Each member owns a portion of the business and they can use what they own from the old LLC to essentially buy-in to the new LLC. This should be accomplished with contracts. Talk with your accountant about any tax implications in doing this and whether a business valuation should occur on the old LLC before the transfer occurs.

Option #4: Create an LLC in your New State and Merge it with the Old LLC.
If you merge two LLCs, the IRS considers it a continuation of the old LLC and allows you to keep the same EIN. You must create a plan of merger and each LLC must vote to approve the merger based on the LLC’s operating agreement or that state’s laws. If the merger is approved, you must file an Articles of Merger with the new state’s corporation commission.

The Arizona Corporation Commission does not have a form for Articles of Merger. You must create a document that complies with the state’s LLC merger laws along with the Commission’s cover sheet and pay the $50 filing fee ($85 for expedited filings). Before you proceed with the merger, discuss your plans with your accountant to understand the tax implications for each member.

If your business plans involve moving to a new state, discuss your plans with your accountant and lawyer to determine what the best course of action is for you. Even if you have a business that solely exists online, there may be good reasons to move your business to your new state.

If you’re planning to move your LLC to or from Arizona, please contact me to discuss you options for making it an easy transitions. You can also connect with me on Twitter, Google+, Facebook, YouTube, LinkedIn, and you can subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

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What was up with General Mills’ Legal Terms?

April 21, 2014 by 2 Comments
General Mills Kids Breakfast Cereals by Mike Mozart from Flickr (Creative Commons License)

General Mills Kids Breakfast Cereals by Mike Mozart from Flickr (Creative Commons License)

I got lots of messages last week when it came out that General Mills’ legal terms said that if you downloaded their coupons, connected with them on social media, entered a contest, or purchased any of their products that you agreed to resolve all disputes with the company through binding arbitration or informal negotiation via email.

And everybody lost their minds.

I can understand requiring arbitration for disputes related to contests. I write terms of service for websites all the time and I also include a dispute resolution where my client specifies where, how, and using which state’s law problems will be resolved. I would never tell a client to write their terms in a way that dictates how they’re going to resolve problems that are not related to a website.

I think it’s ridiculous that they’d even try to tell consumers that making a purchase forces them to resolve disputes in arbitration unless those provisions are available on the packaging and in print that might make a consumer take notice. I’ve never thought to examine a cereal box for contract terms.

Thankfully General Mills saw the light and reversed its decision and voided the offensive terms this past Saturday. In a blog post, General Mills spokesperson Kirstie Foster wrote, “No one is precluded from suing us by purchasing our products at a store, and no one is precluded from suing us when they ‘like’ one of our Facebook pages.”

General Mills still supports arbitration for resolving disputes and I understand why. It can be a faster and more cost-effective way to resolve problems. However, some disputes are better left to litigation where there is the option to pursue a class-action lawsuit when the situation warrants it.

We agree to contract terms all the time. Every time we click the “I agree” button for an online service or to create an account on a social media platform, we are agreeing to the terms of the contract (even if we don’t read the terms). The next time you go to a concert or a professional sporting event, flip over your ticket and read the fine print on the back. That’s a contract. I have no problem with these contracts as long as they make sense for the situation and don’t overreach into scenarios where it would be unreasonable for the terms to extend.

My Neighborhood Whataburger

My Neighborhood Whataburger

For example, I recently heard that there was a sign at a Whataburger restaurant that put consumers on notice that by eating in the restaurant, they agreed to resolve all disputes related to their dining experience via arbitration. I tried to confirm this but I didn’t see such a sign in my neighborhood Whataburger. I visited their website and didn’t see such a provision; however, I was perturbed to see terms and conditions that said:

By giving us permission to use your post or tweet, you agree that we may, at our discretion, use your real or social media user name and the content of your post or tweet (including all accompanying images) on our website to promote our company, products and services for such time period as we wish. You give us the right to edit your post or tweet for brevity, clarity and the like and to modify any image in any manner we deem necessary to use it on our website. You will not have the advance right to review or approve what we post on our website….You will not receive any compensation for granting us the above rights. We agree that you may withdraw the permission you have given us at any time by sending us an email at customerrelations@wbhq.com.

Whataburger’s Facebook page says they can use anything you post on their page but I didn’t see any similar verbiage on their Twitter profile. I think they’re trying to set themselves up so they can use anything you post about the company on social media, including editing it which I’m not too keen about the verbiage they used.

This is a topic that is worth watching to see what becomes the norm in social media marketing. I f you want to talk more about terms of service or social media law, connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. Please subscribe to the Carter Law Firm newsletter and visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Internet law Tagged With: , , , , , , , , , , ,

U.S. Copyright Office is Raising its Filing Fees on May 1, 2014

April 15, 2014 by Leave a Comment
Burning Nature by Vinoth Chandar from Flickr (Creative Commons License)

Burning Nature by Vinoth Chandar from Flickr (Creative Commons License)

Last week, the U.S. Copyright Office announced that it is raising its fees to register your work. Effective May 1, 2014, the cost to register a single work or a collection of works using their online system will go up from $35.00 to $55.00 per application. For those of you who are old school and prefer to register your work by mail, the fee will go up from $65 to $85.

So if you have projects that you were planning on registering with the Copyright Office, now would be a really good time to get them done.  You only have to get your application in before May 1st; it may take the Copyright office until after May 1st to process it.

There is one piece of good news in the fee hike announcement. The U.S. Copyright made an exception for individuals who are registering single works that are not “works made for hire.” If you are a photographer, writer, or some other artist and you want to register you works individually, your filing fee will remain at $35 per application.

I had a question about this exception because I know many artists who create a lot of works that are not works made for hire, but they do it under an LLC for liability and tax purposes.  I called the Copyright Office and they confirmed that you only qualify for the $35 fee if you register as an individual person. If you register your work under your business name, you have to pay $55 per application, even if you are the only person in the business.

Heart in Pages by Vincent Lock from Flickr (Creative Commons License)

Heart in Pages by Vincent Lock from Flickr (Creative Commons License)

The only things that are changing on May 1st are the Copyright Office’s fees. The rest of the copyright laws have remained the same.

To qualify for a copyright, you need an original work of authorship that is fixed in any tangible medium. When you have a copyright, you have the exclusive right to control where your work is copied, distributed, displayed, performed, and what derivative works can be made from it. You get these rights the moment your work is created, even if you never register it with the Copyright Office and even if you don’t put a copyright notice on your work – i.e. “© [Copyright Owner’s Name] [Year].”  If you register your work, your registration provides the presumption of ownership and validity of your copyright rights. If you ever want to sue for copyright infringement when someone steals your work, you must register your work with the U.S. Copyright Office first.

If you want to talk more about copyright, copyright registration, or intellectual property strategy, connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. If you post your original work online, I strongly recommend you check out the many chapters on copyrights in my books:

Please subscribe to the Carter Law Firm newsletter and visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Intellectual Property, Internet law, Legalities of Blogging Tagged With: , , , , , , , , ,

Legal Issues if you Outsource your Blog Content

April 10, 2014 by 6 Comments

“Sam, Sam, the Gorilla Man” by Beth Rankin from Flickr (Creative Commons License)

I don’t believe in outsourcing my blog content, but I understand that some people do because they’re busy, or they’re afraid they’re not a good writer, or they’re not dedicated to maintaining their site. Whatever the reason, it happens. If you fall into this boat, there are some legal ramifications you need to be aware of and plan for.

Regardless of who you use to write your blog material, you should review every post before it goes up to ensure that the content is accurate, especially if you work in a field where misstatements can happen and readers could be harmed if they rely on your blog’s information.

Copyright
If you outsource your blog to a third party, your content creator owns the copyright in whatever they create for you unless you have a contract that states otherwise. Without this contract, they own everything and, at most, you have an implied license to use it on your site. If you want to repurpose a blog post, you have to get your writer’s permission; otherwise, you could commit copyright infringement by reusing the material from your own site.

Indemnification
When your writer creates a post, you often do not know what source material they used or where they got the images for each post. (Yes, every blog post needs an image.) There is always a risk that your writer will rip off someone else’s verbiage or image without your knowledge.

If you do not review each post before it is released on your site, there is a risk that your writer could post something defamatory or harmful to another person. The alleged victim in that case might sue you for damages because they were injured because of your website. To avoid this problem, you can protect yourself with an indemnification clause that holds the blogger responsible for the damage they cause or at least requires them to a pay your attorneys’ fees and/or damages assessed against you.

Clear Contracts
If you work with a third party content creator, you want a clear contract that explains all the pertinent aspects of your relationship – what they will create for you, deadlines, who is responsible for website problems, if they’re allowed to write similar content for others, how you’re going to resolve problems, who will own the copyright, and if the writer can use posts as work samples if they assign the copyright to you.

I love contracts. If the term “contract” is a turn-off for you, think of it as a relationship management document. All it is a document that lays out how your relationship is going to work. I made a video this week about how awesome contracts are.

When you work with third party content creators, not having a contract is not an option. If you want to chat more contracts for your content creators, connect with me on Twitter, Facebook, YouTube, LinkedIn, or you can email me. You can also check out my books about the legalities of blogging:

Please subscribe to the Carter Law Firm newsletter and visit my homepage for more information about Carter Law Firm.

Filed Under: Business Law, Featured Post, Intellectual Property, Internet law, Legalities of Blogging Tagged With: , , , , , , ,
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