SAAS Agreement Vs Software Agreement - Which One Do I Need?

As a SAAS lawyer, I sometimes run into the issue of "Do I need a Subscription Services Agreement (SAAS Agreement) or a Software Agreement (EULA, etc.)?" It is pretty easy, as it all depends on the primary item provided. Let me explain.

If a company is trying to define their model in their end user agreement and are unsure of the form agreement to start with, they should figure out if there is any software downloaded by the users, or if they are only providing software-as-a-service through a browser. While many companies have hybrids (some services and some downloaded software) I think it should be viewed as what is the company primarily providing to their customers.

If they are primarily providing software through a browser, but there is some software downloaded (think Go-to-Meeting or Webex), then they would need a Subscription Services Agreement, as they really are in the SAAS business and not purely licensing their software.

However, if they are primarily providing software which will be downloaded, but there are some services provided (maybe support/maintenance/training/some services through the web), then they would need an a software agreement (EULA, etc.), as they are licensing their a software and it is less likely to be seen as a service.

Every software based company should figure out which form of end user agreement they need, as their customers will be asked about it, and they need to have it right! A few thoughts, from a SAAS attorney on SAAS agreements and end user software agreements.

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Intellectual Property and Confidential Operating Manual Challenges

In this day and age where the average employee only works at a company for 2 to 3 years, and then goes and seeks other employment, or unfortunately due to the changes in the business cycle, or disruptive technologies in the industry, the company lets them go. Because of this they take a lot of intellectual capital with them. They take their knowledge, know-how, all their training, observations, and experiences and go to the next company. Often that other company turns out to be a competitor, or a vendor in the industry working with competitors.

Suffice it to say, "loose lips sink ships," and the amount of intellectual capital that a company loses due to the turnover in employees is rather significant. When a company cuts staff, they are looking for increasing shareholder's equity, profits, and trimming the fat, reducing expenses temporarily to ensure that their stock price has decent performance, and they meet their numbers for the next quarter.

It gets even worse when it comes to confidential operations manuals. These days, more and more companies are allowing employees to have personal tech devices, and downloading employee manuals, and operations manuals, even technical manuals onto tablet computers. This proprietary information is paramount to the company's success, and if the competition has that same information it makes it harder to compete in the marketplace.

As a former franchisor, I dealt with this all the time - if a franchisee was terminated, if their franchise term expired, and they didn't renew, they were compelled in the franchise agreement to return the confidential operations manual. Unfortunately, as more and more things became digital, the concept of them returning those digital files are rather laughable. After all, they could've merely copy them or print them out, and then send you back the original files, and they still had those confidential operations manuals. Do you see the problem?

Yes, there is specific and specialty software which can digitally lock company manuals, but I would ask you how many companies really used DRM software to do that? Not that many, and even that software can be broken into, it happens all the time with blockbuster novelists, and those who steal their work, violate copyright law, and sell it through mass distribution - by then it's too late.

Is there any way to protect this intellectual property, if these sorts of things are going on day in and day out? The answer is probably not. However a fast-moving company probably modifies its manuals quite often, and therefore the former employees have the older versions, the ones which are not being used anymore. If a company stays fast on their feet, they can stay ahead of it all, but I would submit to you that in the end it causes a lot of sleepless nights for those in charge of protecting this proprietary information. Please consider all this and think on.

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Why the Legal Services Act is a Great Opportunity For IP Lawyers to Grow Their Practices

Every now and then, some legislation comes into force that gets many professional services businesses terrified about the changes they have to make to in order to survive.

If you are an Intellectual Property legal services professional, and are worried about the impact The Legal Services Act will have on your business, then read on about how to position yourself and your business as a leader over the next couple of years.

Now, the Act aims to provide a better service for consumers, many of whom feel that legal firms are self-serving and have no interest whatsoever in improving their client-management capabilities.

Multi-service legal firms may be concerned about the impact of letting supermarkets, for example, have legal shops (or preferred suppliers for branded legal services)? You may be in working in such a firm. Will you have to reduce headcount and/or provide services at lower prices in order to compete? More importantly, what impact will this have on the reputation of your industry if prospects /clients look at prices first, before trying to get a handle on the benefits that result from the services you may provide. What happens to your ability to offer a range of legal products, including Intellectual Property advice, that keeps clients more tied to you over many years?

And scarily for those within the profession that are used to a well-trodden path towards partnership status - how on earth will you handle potential conflicts that arise internally, and with clients, if you have non-lawyers as partners within your practice?

There are so many issues to deal with. But the key question you have to answer is this - how will you differentiate yourself as a top Intellectual Property legal services professional, and attract the clients you want, despite the legislative changes taking place?

Now, there is a lot of speculation about the impact this Act will have on small to medium-sized legal practices. Given that many of these typically offer the same range of services, and are really poor at marketing themselves, the worst case scenario that some have foreseen is widespread redundancies because of price wars. If you think about it, and this is pure speculation on my part, supermarkets that start to offer legal services to loyalty card holders (e.g. estate planning, wills, powers of attorney, etc) could suck wind on costs to gain critical mass. After all, they have a huge opportunity to cross-sell financial services, insurance, mortgages, etc.

So, is this a scenario you worry about - that having acquired information on our shopping habits (too effectively for quite a few customers), supermarkets will target your prospects or clients? Many of these might be happy to use a one-stop shop for various services, primarily the less complex legal stuff that sucks valuable time, but with an expectation that they will get a high level of service.

It is easy then to listen to various people tell you to improve your marketing in order to let people know what IP-related expertise you have - e.g. re-design your website, get new logo, buying a list of prospects to invite to seminars/events, send out newsletters, do more networking, etc. That is all well and good, but will not help.

Why?

Well, the key reason is because you have not got into your prospects' minds to find out what IP-related questions they are asking themselves. If you don't do this, any marketing you do will be the same as a lot of your competitors. You simply will not stand out as a leader.

So, imagine you know what information people are searching for, and the ideal outcomes they really want. First of all, you need to change the habit of a lifetime and stop telling people about the services you provide and how great you are. Even when you are feeling the heat, trying to tell people your qualifications and experience to win them over will simply annoy many that you need to convert into clients.

Instead, identify a niche or specific type of client that you want to target and provide free information to. Help prospects understand how to take away their pain and improve their lives. After all, Intellectual Property law is really hard to understand. Whether you use white papers, articles, blogs, newsletters, it doesn't matter. However, what you need to do is promote the IP-related information you are providing, NOT your services. As I have said before, direct response marketing is key here to capture details and guide prospects to information you have.

Like so many other professional services fields, there are very few Intellectual Property lawyers that have a comprehensive system in place to gain the trust of prospects as the first step to winning them over. And if you are looking at how to position your business as the one to go to for IP legal services despite all the legislative changes taking place, THEN YOU NEED TO FOCUS ON THE VALUE YOU PROVIDE TO YOUR PROSPECTS AS YOU GUIDE THEM THROUGH YOUR SALES FUNNEL.

The only way to compete with the bigger practices, and not have to reduce your prices drastically, is to make sure you establish yourself in the minds of prospects as the best IP legal services practice that will address their concerns. You simply can not do that by harping on about your expertise, and listing all the services you provide in the hope that people will be impressed.

The point I am getting to is this...IP legal services professionals should think about the opportunities to establish themselves as leaders within specific niches in order to build and maintain profitable client bases. Changes in legislation tend to destroy firms that are not nimble enough to appreciate the need to continuously evolve with the times.

The traditional methods for marketing and advertising legal services are dead (by the way, if you have a yellow pages advert which simply lists your services down, be very afraid). What you need to do is think about is how to implement a new business model that focuses on providing answers to questions your target market has, and use this as the basis to develop trusted relationships with prospects. If you focus on this first, then you will find yourself with the clients you want.

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How to Mess Up Getting Music Samples Cleared

Samples have been used in recorded music for a long time. For example, the Beatles' 1967 "I Am The Walrus" recording used a BBC radio program in its mix. Unfortunately, most people are clueless about copyright law and sampling. Errors are costly and it is usually cheaper to ask first. Here are some ways to mess up using music samples and costing yourself more money than you can afford.

Getting just one clearance for a sample

The music that you want to use is protected by two copyrights. One copyright for the performance (what was recorded) and the other copyright is for the musical composition (the song, in no matter what form). The performance copyright will usually be owned by the record company (a long time ago, there were these profitable companies that sold music) that initially issued the recording. The copyright for the composition is usually owner by the song's author or, more likely, the publisher (this often is a company that cannot hum a tune, but they sure can make money with the tune). So just because you got clearance from the owner of the song, you still need clearance from the owner of the recording. Things get even more complicated when the publishing is owned by more than one company. Then you have to strike a deal that pleases everyone.

Re-record your own sample

Maybe you don't want to be bothered with getting clearance for a sample. You just want to put out a song and be done with it. So you think, "I can play by ear. I can easily figure out how they made that riff. Look, I learned how to slap the bass like this. That is all they are doing." Not so fast. You might be creating a new recording (performance) but you are still probably using a copyrighted song. You cannot just bang the tune out on a different instrument, in a different style, while standing on your head.

You can play the tune yourself or hire someone to do that (there are companies specializing in that area) to avoid paying royalties on the recording, but you still will need to get clearance for the song. If you infringe the copyrighted song, you get to pay lawyers to fight off the publishers.

Change the speed of the recording or add some effects

No dice. This would be a "derivative work." You derived your recording from the original recording. If you could just speed up or slow down a song to avoid infringing copyrights, then we would hear nothing but Chipmunk songs on the radio as stations would prefer to not pay for the songs that they play. Re-mixing an original work does not help you. You are still using the recording and the song. Again, if that was allowed, then the radio stations would play only re-mixes.

Only use a very small sample

People repeat things that they don't know to be true, but sound good. So people love to rattle off some ideas that you can use a certain maximum number of bars of a song or recording or a certain number of notes. Well, if you believe that, go rob a bank and tell them that you only want to rob a very small amount of money.

Piggy-backing off of someone else's sample clearance

You might hear a song everywhere, such as on the radio, TV, movies, shopping malls, and elsewhere. Just because everyone is using it, it doesn't mean that they didn't get a clearance or that you don't need a clearance. Yes, if you speed on the street in a pack of other speeders, the cop can ticket only you. You will lose if your defense is "But everyone else was speeding faster than me." Yes, it is not fair. However, life is not fair and as soon as you figure that out, you will be more at peace. A sample clearance clears the person permitted to use the sample. If you do not have a piece of paper clearing your use, you are not cleared, no matter if the clearance was given to your band mate, your friend, your neighbor, or anyone else. In one recent example, Rianna got permission to sample Michael Jackson's "Wanna Be Startin' Something'" tune which chants, "mama-say mama-sa ma-ma-coo-sa." However, MJ got that chant from a sample of another person's recording, a Cameroonian musician named Manu Dibango. So when Rianna thought that she was all cleared when getting clearance for the MJ song, she found out through Manu Dibango's lawsuit that she still needed to deal with him, as MJ's song included a derivative sample (allegedly).

Wait, there's good news

Now that you know what not to do, turn around and make your music without getting in trouble so long as you take care of your business. Between 70% to 80% of requests for sample use are granted. Just ask. Nicely. Before you issue the music. And be prepared to sign a check.

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Is This The End Of The Copycat Era?

It is currently estimated that approximately 7.5 million people worldwide are engaging in illegal file-sharing, with 95% of all music files exchanged online being unlicensed and unpaid for. Media files are shared between internet users through file-sharing software, such as Kazaa and Limewire, which can be easily downloaded. The rise of file-sharing online has caused enormous losses to the music industry in particular, with an estimated £1.2 billion being lost last year. In light of this, it is no surprise that Parliament have sought to tackle the huge global problem of online copyright infringement.

By definition, the internet is a worldwide phenomenon, which is constantly used by billions of people every day. The global nature of the internet and online file-sharing has made it particularly difficult for Parliament to prevent online copyright infringement. The Digital Economy Act 2010 (DEA) received Royal Assent on 8th April 2010 and has now been passed in an attempt to solve this problem. Since its introduction, the Act has caused much debate.

The DEA has imposed a degree of responsibility on Internet Service Providers (ISPs), who are now obliged to monitor the online activities of internet users. If an ISP catches an internet user file-sharing, they must issue them with a warning. ISPs are also obliged to provide lists of copyright infringers to the copyright holders.

However, by far the most controversial aspect of the DEA is that it permits the court to order an injunction, effectively cutting off an individual's internet connection. Under the Act, internet connections can be blocked at "a location on the internet which the court is satisfied has been, is being or is likely to be used for or in connection with an activity that infringes copyright". In deciding whether to grant an injunction, the court takes into account amongst other things whether the injunction would be likely to have a disproportionate effect on any person's legitimate interests and the importance of freedom of expression.

Some have argued that access to the internet is a fundamental human right that should not be interfered with. Also, it could have adverse effects on innocent parties who have their internet access blocked by virtue of another's illegal act. For example, withdrawing internet connection to an entire internet cafe because one user is found to be file-sharing. On the other hand, others argue it is the only way to put a stop to the ever-increasing and long-lasting problem of online copyright infringement.

The introduction of the DEA is a symbolic landmark for record labels, as it will both: (i) help deter further illegal file-sharing; and (ii) assist them to sue those that continue to infringe copyright. Previously, it has been difficult for record companies to sue file-sharers as they have not been able to identify who is actually responsible. However, legal action has become a realistic prospect as under the Act, as ISPs have a duty to provide lists of copyright infringers to infringers copyright holders. This now helps enable record companies across the world to bring action against those exploiting the internet.

The vast majority of legal disputes that do occur between record companies and copyright infringers tend to settle out of court. However, those seeking to defend their innocence should be weary in light of the relatively recent US case of Record Industry Association of America -v- Thomas 2007. The Defendant could have settled out of court for around $4,000, but instead opted to fight the case. At trial, the court found that the Defendant to have illegally downloaded 24 songs and ordered that she pay $9,250 per song to the Claimant. She was therefore liable to the Claimant for a total of $222,000! A controversial aspect of the case was that the Defendant was found liable despite the Claimant failing to prove that the songs on her computer had actually been transmitted to others online. Rather, the act of merely making them available to copy was enough to hold her liable.

If you wish to take action against copyright infringers, it is necessary seek legal advice from an Intellectual Property Law specialist. The radical changes the DEA has introduced could well be the beginning of the end for a long era of bootlegging in the digital age.

By: Lewis Round (Hons) Paralegal at Virtuoso Legal

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Division of Property During a Divorce

In a Divorce proceeding, the Court has the power to "justly and equitably" award property. Therefore, it is extremely important to note that the Court does not automatically apportion property division at fifty percent (50%) to each party. In many cases, the interpretation of "just and equitable" has meant an award of fifty percent (50%); however, this is always subject to the specific circumstances of the Divorce case.

The Court has the authority to divide "marital property." Therefore, it is helpful to develop a chart or summary of all of the marital assets as well as non-marital assets. Marital assets include anything of value that is accumulated after the date of marriage. This includes, but is not limited to, cash, accounts, investments, pension, 401(k) plans, real estate, investment property, business interests, or personal property items. Anything that has value and that was accumulated after the date of marriage is considered marital property and is subject to division by the Court.

Non-marital property is property that was either brought into the marriage by one party (e.g. a vehicle that was owned outright by one spouse before he or she got married) or if the property was received as a result of an inheritance during the marriage or was given as an exclusive gift to that particular party during the marriage. It is important to note that the Court assumes that all property is marital unless one party establishes to the satisfaction of the Court that it has a valid non-marital claim. This is typically done by "tracing" (showing a chain of events along with supporting documentation that would lead the Court to believe that the property was non-marital in nature). It is also important that the non-marital property is not "commingled" with marital property. For example, if one party receives an inheritance of $10,000, to retain its non-marital nature, it should be separate and apart from any marital funds and should not be "commingled" in a joint account.

In determining issues relative to property and debt, one of the most popular misconceptions is that title (who is listed as the named owner of the property) is important. Whether it is a vehicle, a pension plan, a 401(k) plan or any other asset, title is not the controlling factor relative to dividing an asset. If it was accumulated during the marriage, it is marital property regardless of whose name it is titled under. Another important consideration when analyzing and agreeing to a property division is that it is final. Once the Court signs a Divorce Decree, which gives an award of property to both sides, it is final. Absent extremely rare circumstances, it can never be changed.

When analyzing the property division, it is almost always a good idea to award an asset to a party who also is the debtor on that particular asset. For example, if one party is driving a Lexus motor vehicle and he/she is named on the loan or lease for that vehicle, he or she should be awarded that vehicle subject to the loan so that there is no confusion on the part of any party as to who will service that particular debt.

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