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So were you one of the lucky ones this morning?  Were you able to pre-order yourself an iPhone 6 or an iPhone 6+?  I was successful in getting an iPhone 6, a gold one with 128 GB if you are interested.  However, I was also able to get a copy of my Wireless Customer Agreement with AT&T, which I find interesting.  Usually, when I make large purchases online, I like to copy and paste the agreements in an MS Word document so that I can analyze them and truth be told consider utilizing their language in my agreements.  Attorneys are always looking for drafting language, copying and pasting speeds up the process for clients, but also for the attorney; it allows us to see how other agreements try to encompass a transaction and reduce it to writing (at least for a business attorney).  Further, when we are developing a new transaction for a client, it helps to see what is out there already in the marketplace. Do we have something novel or is someone else already doing it that way?

Anyway, this post is not about analyzing attorneys, but rather I thought it would be interesting to see how a giant wireless company drafts its agreement and what you are agreeing to, as I find for smaller businesses they are always curious what the “big boys” do for their agreements. Also as I stated, transactional attorneys will use drafting language from another company’s agreement if their client is doing the same or similar, then modify to the client’s needs (not to mention in B2C agreement, if the customer already understands a competitor’s agreement it makes it easier for them to understand if the language is the same).  My last rationale is that in our TL;DR social media culture, I thought I would highlight some provisions I thought were interesting if you were just curious as a fellow user of wireless services.

So here is the pdf version of the Wireless Customer Agreement that popped up on my screen that AT&T made me agree to get my iPhone 6 on preorder so that you can follow along.

I. 2nd Paragraph = Please Read – Are we Tracking You? And You are Agreeing to Arbitration.

Right off the bat, in the second paragraph, in big, bold letters, AT&T’s agreement states:

PLEASE READ THIS AGREEMENT CAREFULLY TO ENSURE THAT YOU UNDERSTAND EACH PROVISION, INCLUDING OUR USE OF YOUR LOCATION INFORMATION (SEE SECTION 3.6). THIS AGREEMENT REQUIRES THE USE OF ARBITRATION ON AN INDIVIDUAL BASIS TO RESOLVE DISPUTES, RATHER THAN JURY TRIALS OR CLASS ACTIONS, AND ALSO LIMITS THE REMEDIES AVAILABLE TO YOU IN THE EVENT OF A DISPUTE.

A. Privacy Issue

So what’s all of that mean? Well, if we go down to Section 3.6, we soon discover that this all about how they handle information that they receive from your “Device” (your phone). One of the relevant parts states the following:

We use that information, as well as other usage and performance information also obtained from our network and your Device, to provide you with wireless voice and data services, and to maintain and improve our network and the quality of your wireless experience. We may also use location information to create aggregate data from which your personally identifiable information has been removed or obscured. Such aggregate data may be used for a variety of purposes such as scientific and marketing research and services such as vehicle traffic volume monitoring. It is your responsibility to notify users on your account that we may collect and use location information from Devices.

Interestingly, the language here tracks with many privacy policies that other companies use and they’ve incorporated it into the agreement.  Additionally, AT&T recommends you see its privacy policy on its website by stating:

Please review the terms and conditions and the associated privacy policy for each Location- Based Service to learn how the location information will be used and protected. For more information on Location-Based Services, please visit att.com/privacy. 

I’ve discussed the differences between a contract and a policy in a Slideshare presentation before if you are curious.  In this case, some of the policies are firmly settled into and a part of the agreement; this is always a decision to ponder when drafting of whether or not to incorporate policies into an agreement, thereby making them a part of the contract.

B. Arbitration

So here is one fun part (well, at least to me), throughout this agreement AT&T strives to make it clear through all capitalization or bolding of letters that you agree to binding arbitration. “What’s ‘arbitration,’ Precious?!?” (Pardon, the dorky humor.)

Well, AT&T tells you what it is exactly in Section 2.1 of the agreement.  Arbitration is NOT court; it is a form of “alternative dispute resolution.”  It is less formal than a court proceeding and tends to be faster in reaching a resolution in a dispute than going to court. With that being said, generally speaking, many feel that arbitration tends to be favorable to the business and anti-consumer.  I’m not here to judge whether or not that is true, but what is clear is that AT&T has its consumer’s waive the ability to go to court (other than small claims) and has also barred class arbitration and class actions.  “Class” actions or arbitrations are where a large number of people who have suffered that same injury from the same person (a business entity is a legal person) band together to pursue a claim.  This type of provision is also seen as anti-consumer by consumer advocates.  For my part and this post, I’m just going to address the question: can they do that?

Yes, the Supreme Court of the United States (SCOTUS) has made clear in recent rulings the applicability of the Federal Arbitration Act to these types of agreements. So if you have a dispute with AT&T beyond small claims court limitations, you are going to have to arbitrate: there is not another option.

It is worth noting here AT&T had a case before SCOTUS on this matter in AT&T Mobility v. Concepcion, 563 U.S. 321 (2011).  Basically, SCOTUS ruled that the FAA preempted state laws (in this case California’s law) that prohibit contracts from disallowing class-wide arbitration, thus allowing businesses to include arbitration agreements eliminating a consumer’s ability to bring a class action suit. So it should come as no surprise with a SCOTUS victory, they are going to include this in their agreements.

II. Section 6.0: Data – Why all the CAPITALIZATION and Bolding?!

So another area that caught my eye, and probably purposefully so by the drafter of this document is Section 6.0.  Why did it catch my eye?  When scrolling down the text one cannot, but help notice the large amounts of bolding and capitalization in Section 6.0.  And of course they are going to do that, it has to deal with one of the biggest contentious areas that people have with their wireless carriers, the data usage plan.

A. 6.1: Overage Charges; No Rollover; and Terminate with or without Cause

So this isn’t exactly news, as many of you already understand this, but I thought I would pull out the line in the agreement that states it for you:

On Data Services with a monthly megabyte (MB) or gigabyte (GB) data allowance, once you exceed your monthly data allowance you will be automatically charged for overage as specified in the applicable rate plan. All data allowances, including overages, must be used in the billing period in which the allowance is provided. Unused data allowances will not roll over to subsequent billing periods.

You will be charged for overages if you are on a rate plan where that is possible, so those of you grandfathered in will probably cling to your rate plans that have no overage charges till you become a grandfather.  Also, no rolling over unused data into another billing period.

Then we have this sentence at the end of Section 6.1:

AT&T RESERVES THE RIGHT TO TERMINATE YOUR DATA SERVICES WITH OR WITHOUT CAUSE, INCLUDING WITHOUT LIMITATION, UPON EXPIRATION OR TERMINATION OF YOUR WIRELESS CUSTOMER AGREEMENT.

Basically, AT&T may terminate your data services, and they do not need a reason to once your wireless customer agreement ends whether it expires or terminates. 

B. Section 6.2: Don’t Do this Stuff as It’s Not the Point of the Wireless Data Service (i.e. Prohibited Uses)

Ok, I am not quoting Section 6.2 (as the relevant part I want to discuss is long), and you are probably getting tired reading this post as it is long, but for those of you have stuck it through all this, much appreciated.

Anyway, for this wall of bolded text, basically, it is AT&T’s intent to prohibit certain behaviors as those uses are probably illegal, harms AT&T’s infrastructure, damages AT&T’s ability to profit, or exposes them to some other liability.  It’s pretty detailed and lists a lot of examples. Also, they save themselves on making sure you understand that the list of examples are not the only ones of Prohibited Use by stating that their listing is “without limitation.”  Of course, if AT&T “believes” you are using their Service in one of these prohibited manners, it may terminate the agreement.

III. Section 10.0: Doing Business in Multiple Jurisdictions.

So I am going to round out this post at the end of AT&T’s Wireless Customer Agreement (seems to be a good place as any to stop), as I tend to do this blog for business owners (small and large), and Section 10 to me highlights what businesses face when they operate in multiple jurisdictions.

Most businesses start off in one state, and then as they become more successful they grow, and that growth is sometimes beyond the state they started in.  Depending on the situation, sometimes you can avail yourself of your home state’s laws and other times when you do business in another state you are bound to follow their laws.  For large businesses, like AT&T they have a myriad of laws that they must follow at the federal level, but individually as to all the states that they have customers in.  Sometimes those state laws force a company to stipulate to things in their agreements, in particular when it is with consumers, due to some states passing consumer protection laws.  Here, in AT&T’s Section 10.0 we see that California, Connecticut, and Puerto Rico (which is not a state, but I’ve been using “state” here for my own convenience) have special provisions.

Therefore, this brings me to a point for all you businesses that have operations in multiple states. While for the sake of ease, and that variations in your operations and systems cost time and money, it is sometimes inescapable due to a state’s laws that your agreements will be regulated.  So you should consider, especially when it comes to your consumer agreements, knowing what the consumer protection laws are if you intend to a comprehensive catchall agreement as AT&T has done here.

Anyway, I think this makes up for my lack of posts for several months.  I will strive to be less wall-of-text on you readers next time and spruce up the next post with pictures, possibly my doodles for a Draw that Law when I get back to it.  As always, mahalo for reading.

-RKH 

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

What is the Entire Agreement (aka Integration aka Merger) Clause?

The entire agreement or integration clause basically states that anything not in or a part of the written agreement, is not a part of the agreement.  It is premised upon the parol evidence rule, which is a rule that prevents a party to a written contract from presenting outside evidence that contradicts or adds to the written terms in the agreement.  Basically, you can’t say the final agreement is wrong because you had discussed something different in letters, conversations, or side agreements prior to the final agreement.

Why do we have it?

At a certain point, you either have a deal or not, and while some people prefer handshakes, their attorneys feel that having something in writing is better.  Now, imagine, if we allowed parties that were in dispute of a contract continually bring in evidence that undermined the final written agreement.  It would kind of make settling on the terms of the agreement pointless, wouldn’t it?  So, we limit the understanding of the agreement to what is reduced to writing, bolstered by this clause.

Generic Example

This Agreement sets forth the entire agreement of the parties and supersedes all prior or contemporaneous writings, negotiations, and discussions with respect to the subject matter hereof.  Neither party has relied upon any such prior or contempraneous communications.

Example of a an Entire Agreement Clause in a Consultant Agreement

This Agreement represents the entire understanding between the parties with respect to the subject matter contained in it and supersedes all other written or oral agreements made by or on behalf of Consultant or Client.

Example of Integration Clause in an Employee Agreement

This agreement constitutes the entire agreement of the parties relating to the subject matter of this agreement and supersedes all other oral or written agreements or policies relating thereto, except that this agreement does not supersede or limit the Employee’s rights under any benefit plan.

What about changing the terms of the Agreement?

Well, that’s what the Amendment clause is for, and that is for another post!

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Remember my post on Memorandums of Understanding? Well, yesterday I discussed Acceptance. Now, let’s bring the two concepts together to help you understand how a memorandum of understanding fits in contract law.

An Agreement to Agree

Letters of Intent (LOI) and Memorandums of Understanding (MOU) are usually not contracts (remember contracts are defined by words or actions, so these two types of documents can be a contract depending on the language).

Why are they not contracts?  Well, generally the language in them is broad and there is only an indication of what the terms might be, as they are still being negotiated.  Therefore, there is only an understanding between the two parties that they would like to agree.  Remember without assent, there is no acceptance, and without acceptance there is no contract.  With LOIs and MOUs there is even a question of what is the offer?

So Why Use Them?

What they are great for is being used as a starting point for a formal contract to be drawn up at a latter date.  In particular, still evolving relationships and situations are good for LOIs and MOUs because both sides recognize the need to be flexible to figure out what they want in a formal agreement.  Furthermore, they know if the business deal does not come through there was no contract to sue each other over. Basically, it was an experiment.

Bottom line: Using LOIs/MOUs as the Basis for Future Agreement

Consider using a LOI or MOU in a situation where you and the other side do not know how the relationship will work.  You can experiment for a while and determine what the important terms will be.  From there you both can negotiate and settle upon a more formal agreement at a latter date.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Today’s Draw the Law is a special one, done as a shout-out to all my photographer friends. In particular, this post is for Dallas Nagata White and her great assistant/husband Ed White and their support from the local photographer community. Thus, I will be delving into a narrow subset of contract law with IP tossed in for good measure to create a montage post of rights of publicity, copyright, model releases, and licensing agreements to help out photographers and models sort through the law so they can go back to doing their art and furthering their careers.

The Context

Before getting to the law, let’s set-up the context for all these concepts. It is a typical scenario: photographer is hired to do a shoot, selects a model, takes pictures, then posts or publishes those pictures. In those simple steps, without written documentation, there can arise a lot of problems. Then we get into the fight between photographer, model, and possibly third parties that use those pictures.

Copyright: The Photographer is the Author

Without delving too deeply into copyright law (because a) it is apart of my talks and b) I will be returning to it at a later date) understand that the photographer is the copyright holder because they authored the picture. Specifically, a copyright is given to anyone who creates “original works of authorship.” Therefore, as soon the photographer takes pictures of guys in cartoonish outfits the photographer is the copyright holder of the photographs. Copyright, is as it sounds, the right to copy. Therefore, a photographer usually assigns or licenses that right to make copies to companies who then use those images for marketing campaigns and the like.

Rights of Publicity: What about the Models?

Here comes the fun part of the situation, while the photographer is the copyright holder of the photograph the model has right to their face, likeness, even images of their body and the sound of their voice. This is known as rights of publicity; Hawaii law states that, “every individual or personality has a property right in the use of the individual’s or personality’s name, voice, signature, and likeness.” (HRS 482P) Therefore, it is typical for models to sign a model release to allow their image to be used in a manner the photographer sees fit.

Model Release vs. Licensing Agreement: Power Struggle

While both rights of publicity and copyright can be licensed, assigned, etc . . . for simplicity sake for this post I am going to separate them into model release and licensing agreement. Typically, a photographer will want to get a model to sign off on as many things as they can in a model release. The model release works by releasing the models claims to the ability to enforce their rights of publicity claim as to their image. In the case of a famous model and/or photographer, their goal is to try to limit the use of their likeness/image and/or photos by others because they can get more money. A famous actor/model will read through a model release or may even have their own agreement to force a photographer to either pay a lot for a lot of usage out of their likeness or pay minimal for say a one-time use whereas an upcoming model will probably sign away a lot of rights to a famous photographer due to the chance of becoming noticed. At the end of the day it all boils down to negotiation or sometimes going with what is the standard practice of the industry.

Third-Parties and Our Digital World: Letting the Images Out into Cyberspace

This last part is what we see on a daily basis on the web, but typically it is where people also get confused. So what happens now that we have the Internet, social media, and smartphones? We share images, we edit them, change them, see something we like and snap a shot of them, then share them. So let’s say that photographer takes a picture of model, and then posts the image to a sharing site. A company sees the picture and likes it, takes it, then slaps it on its merchandise to sell them. Let’s say the sharing site has a Creative Commons licensing agreement. Therefore, photographer actually licenses the right to copy to the site, which in turn gives that right to other users. Thus the copyright holder (photographer) has licensed the right (to use the photo) to third parties (the company) through the sharing site (due to Creative Commons licensing agreement). However, do you see the hang up? The model has NOT given up their rights of publicity to the company. They have every right to control their image, especially in terms of commercial use. Thus, while the company may have licensed the copyright for the photograph it has not gotten the right to use the model’s image/likeness in conjunction with its goods.

Last Words

Copyright law is federal, whereas Rights of Publicity is a state law, and not all states have Rights of Publicity on the books. Finally, you may wish to consider giving public notice of ownership of publicity rights, which you can file with the state of Hawaii’s Department of Commerce and Consumer Affairs. Chapter 482P permits an assignee or transferee of publicity rights to make a publicity rights trade name registration. For all the foregoing reasons that is why my photography and model friends you should consider documenting your agreement regarding photos.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

It’s a New Year, but it’s time to return to an old favorite. DRAW THE LAW! Seeing, as it is so popular with business people, entrepreneurs, social media mavens, DJs, other lawyers, and corgis (ok, I made the last one up). I am moving the postings for Draw the Law up to either Tuesdays or Wednesdays (given my schedule) so you can enjoy it for more of the week! I will always being going back to basics of law and legal issues for entrepreneurs and small business owners. They will also be more bite-sized (or is that byte-sized for a blog?).

Starting Out With Contracts

So it’s a New Year, and it is the Year of the Water Dragon in the Chinese zodiac, which means for most signs prosperous. Let’s forget the debt collecting from last post and the woes of last year, let’s make some deals!

Today, I am kicking off with contract law, which I hope to culminate in a month or two into a live contract workshop for businesspeople to understand what the word “contract” means for attorneys. Why? I believe the more you know, the more it helps lessen your legal costs and doesn’t waste your attorney’s time of re-explaining the wheel to you. (*In addition, for the time we are on contracts, Boilerplate Blurb will be fused with Draw the Law).

What is a Contract?

IT IS NOT THAT PIECE OF PAPER YOU SIGNED! Let me repeat that a “contract” is NOT a set of papers with words on it that you signed. The papers with words on them are merely an embodiment of the agreement.

A contract IS a voluntary promise or a set of promises that a court will enforce.  A contract can be oral or written. The details of the contract are the provisions or terms.

Do I Need a Lawyer to draft my Contract?

No, not at all. We make contracts all the time. Have you every told a friend you would sell them an old textbook or computer for X dollars? Notice what you are doing. Your promise is that you will exchange your property for the promise of them giving you the proper amount of money? Did you need an attorney for that?

What you did need for this to be a contract is the promises, but the support of an exchange of something valuable between the parties (you and your friend).  This is called consideration. Typically, in our modern capitalistic society, consideration is money in exchange for goods or services.

Do I Always Need Consideration?

Yes.  There is no contract without consideration. To tell if something is good consideration we look for a bargained-for benefit or detriment. However, the benefit or detriment MUST be legal. Remember that a contract needs to be enforceable by a court. Thus if you wanted to trade your gold watch for meth, and the drug dealer stole your watch, you could not go to a court to enforce the agreement to get the meth. Why? Meth is an illegal substance, therefore not good consideration. While you always need consideration the subject of the promise(s) can never be something illegal.

A Word on Complex Contracts and Attorneys

While, I did say you did not need a lawyer to draft your contracts first consider the complexity of the transaction you are doing. Consider what you want spelled out, what you are bargaining for, and what does it mean for your company? Finally, realize that many transactions are regulated or have a certain applicable commercial laws, thus legal review can be crucial.

If you enjoyed this post be sure to “Subscribe” today (I’m sure it was a New Year’s Resolution)!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.


Well, it’s 2012, but social media is still around and as you are trying to figure out how Timeline works on Facebook these are some of the interesting social media and the law stories that have cropped up:

Item #1: Who Owns a Twitter account?

A former employee is being sued by his South-Carolina based company. For? Taking their twitter account. Noah Kravitz of Oakland, CA is being sued by PhoneDog, a mobile phone news site company for multiple claims pertaining to his act of switching a Twitter account used by him for the company. This account had amassed a following of 17,000 followers, and PhoneDog is seeking damages of $2.50 per follower over eight months for a total of $340,000.

Based on the couple of articles I read on this story the only thing clear is that the terms agreement surrounding the account were unclear. As more and more companies continue to see social media as a valuable tool and resource and are actually having workers use them the reality is that we will see more lawsuits arise. I think the valuable lesson here is to have a social media policy, a worker agreement for social media marketers, and transfer procedures in cases of ending events, like termination. Without agreements in place you will be left at the mercy of a court.

You can read more about the situation in this New York Times article.

Item #2: Bloggers are NOT Journalists.

BLOGGERS PAY ATTENTION! You may think you dig up the facts, do solid research, and ask serious questions, but you may have to face the fact that courts may not see your as a journalist. Why is that important? In many states there are media shield laws. For example, Oregon has such a law.

Blogger Crystal Cox sought to defend herself from investment firm Obsidian Finance Group against a $10 million lawsuit for defamation. The blogger lost the case even though she argued that she was an “investigative blogger.” The judge disagreed because she was not employed by some official media entity, and therefore she could not take advantage of Oregon’s media shield law. She lost and the judgment against her was for $2.5 million.

I am not sure if this had any effect, but just from casual observation and what I am told from litigators and trial attorneys is that pro se (representing yourself) litigants often lose, and often lose badly.  So that may have been a factor. However, what is clear is that just blogging and acting like a journalist is not enough. For more info read this article from Seattle Weekly.

Item #3: Optimal Social Media Marketing Plans Can Help you Comply with CAN-SPAM Act

I ran across this post, “How to Make Optimum Use of Social Media Platforms for Marketing Your Business” while flipping through my Zite app on my IPad. If you are a small business like me and are trying to get a handle on this thing called social media you know it isn’t always easy making a connection via Twitter, Facebook, or even your blog. So I really appreciated the tips it gave in this short post.

However, when the biggest things that help me to help you (via this article) is that last section, “Automation doesn’t turn out to be Helpful Always” – why? Well, I did a Law Lunch with The Greenhouse Innovation Hub back in December where I talked about complying with the CAN-SPAM Act.  It seems that good marketing mirrors what CAN-SPAM Act is trying to curb namely:

Whenever you are searching for consumers, you need to strike real conversations and do not spam their inbox with auto-generated mails.  This can even turn a potential customer away from you.  It is necessary that you engage in regular conversations with qualified leads.

So do yourself a favor and stop relying on spam and do real conversations and follow-ups. In addition, make sure you are complying with the other requirements of CAN-SPAM Act (because it does not apply just to bulk e-mails) when sending that personal touch e-mail.

Have a great first work week of 2012! Lookout for Draw the Law next week. If you can’t wait to see my doodles “Subscribe” today!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

So last time I talked about Electronic Agreements I mentioned “clickwrap agreements.”  As you go cybershopping for the right gifts, and you invariably sign-up for new services or download new apps to play with on your iPad during the holidays you will come across the clickwrap (aka “clickthrough” or “clickwrap license”).  In particular, because of the Electronic Signatures in Global and international Commerce Act, these types of agreements have found legitimacy and therefore, commonplace usage.

What is a Clickwrap?

Before, we get to the clickwrap, you have to understand the shrinkwrap. The shrinkwrap agreement was how boxed software was sold. It basically state on the plastic wrapper that by tearing it open, you as the user, would agree to the terms of the software enclosed. Many people found this unfair that how could you agree to something you did not even see. However, courts upheld these agreements as enforceable (and I will get more into why later).

Thus, as the industry has shifted from boxed CD-ROMs for sell and moved to downloadable apps and packages online the shrinkwrap became the clickwrap. Usually, it is in the form that requires the end-user to manifest your acceptance through clicking a button that says “Ok” or “I Agree” after scrolling through that wall of text that you did not read. If you clicked, “Cancel” or the like, you would be unable to access the product or service. This take-it-or-leave-it approach is usually an adhesion contract, where one party lacks bargaining power and thus are forced to accept terms heavily in favor of the drafter.

Are these Enforceable?

Yes. Despite the imbalance in the bargaining power among the parties, Courts have upheld them. However, like all contracts any provisions that unconscionable, against public policy or law, will not be enforced. With that being said here are some of the grounds or various provisions that agreements have been upheld on:

  1. by clicking the clickwrap button after notice means consent has been given
  2. a clickwrap is simply “Money now, terms later”
  3. forum-selection clause
  4. arbitration clause*.

*Mandatory Arbitration is that Legal?

It depends. In a case between a user and the virtual world, Second Life, owner, the judge actually struck down a mandatory arbitration clause. The plaintiff argued that it had been “both procedurally and substantively unconscionable and is itself evidence of defendants’ scheme to deprive Plaintiff (and others) of both their money and their day in court.” The judge agreed and then struck down the arbitration clause. In general, the court went through a thorough analysis, but the main thing to takeaway was the arbitration would have made it more costly, rather than less costly for the plaintiff and for them to initiate the arbitration the plaintiff would require to advance fees and due to confidentiality no plaintiff would be able to learn from past disputes, thus the company would hold all the cards.

Why is it Referred to as a “License” sometimes?

As a I discuss in my IP Law talk for Small Businesses I discuss that software is actually copyrightable. Software is “written” and reduced to a “tangible medium” which makes it like literary works and sound recordings. Typically, with copyright, in your “bundle of rights” that come packaged with it you reserve the right to control the copying.  Thus notice that a famous series of books, the original copyright owner can license parts of the book out to studios for certain characters, duration of time, etc . . . because they own the “right to copy.”  Thus, there is no difference between software and their end-users, that the end-user is merely receiving a license to use the copyright owner’s software and is not given the ability to make copies as terms of the End-User License Agreement (EULA).

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Happy Cyber Monday everyone! I am sure you all are hard at work after Thanksgiving, trying to secure the best deals you can. So I will keep this brief and let you get back to your online shopping, but I will make it relevant to what you are doing. Today’s Boilerplate Blurb is all about Electronic Agreements.

Are Electronic Agreements just as Valid as Paper Ones?

Yes, thanks to the Electronic Signatures in Global and International Commerce Act (the E-sign Act) and Uniform Electronic Transactions Act (UETA) you can electronically “sign” for electronic documents. Thus when you send a draft of a contract offer and ask the opposing side to “sign” it and e-mail it back the electronic contract and the electronic signature are as legal and enforceable as traditional pen and paper contracts.

What about “Click to Agree”?

Yes, an e-contract can also be formed when you “Click to Agree” (I will talk about “clickwrap” agreements on another Boilerplate Blurb). So when you are on a website or installing new software on your computer your action suffices to form a contract. Therefore, when you log on and download new software or online game, and you scroll really fast, ignoring the terms and conditions or end-user license agreement (EULA), just so you can get to downloading new media or playing your game sooner, you are giving your agreement to the company’s e-contract.

But There was No Way for Me to Sign it, is that a Valid Signature?

Yes, in fact you can indicate your acceptance via “e-signature” through a variety of methods that will legally bind you to the contract. If you shop online, as much as you are doing so today, then you have seen them. The “I Accept” button, using the “scrambling” technology where you have to type in the funky looking text that spells out random things, or typing your name in the signature box, or even pasting your scanned signature in are all valid methods.

Must I use the Company’s Electronic Agreement?

I know someone there is curious, even though it strikes me as odd that you are reading a blog and your question is how to opt out of electronic agreement even though you are probably using the Internet to read it. Anyway, short answer, no, you don’t have to, as you are and businesses are given the right to choose to continue to use paper. However, when a company gets a consumer’s consent for electronic use, they must give prior notice telling you whether paper contracts will be available and if you change your mind later, and what that paper agreement what are the costs.  The notice also needs to tell you if your agreement is for the one-time transaction OR applies to a larger group of transactions. Therefore, you might have to agree more than once if you continue to interact with them or you agree once, but have signed off on a whole bunch of future transactions.

Are there Times that I Cannot Use an Electronic Agreement?

Yes, certain types of documents MUST be in paper format. They include some of the following:

  1. family-related documents (such as wills, adoption and divorce papers);
  2. safety, health, or specialized industry situations (such as insurance, product recalls, or hazardous material transportation); and
  3. legal and real estate matters (such as court orders, notice, foreclosure, and eviction).

Good luck with your cyber shopping, and if you get dizzy from the sales take a break and read what you are agreeing to when you click and buy! If you enjoyed this post or any of my others please “Subscribe” to this blawg.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

As a transactions attorney that drafts agreements for businesses I have found that explaining what certain clauses do is beneficial to the client and organization.  Therefore, today’s Law in the Brief covers Act 139.   Also lookout in the future I will be doing little posts on boilerplate language to help you understand what is going into an agreement.

General Overview

This new law aims to help consumers by regulating the language used for contracts with automatic renewal clauses.  Act 139: Relating to Contracts, requires the following:

  • use of clear and conspicuous disclosure of automatic renewal clauses and cancellation procedures for all consumer contracts and offers with an automatic renewal provision and additional disclosure for contracts with a specified term of twelve months or more.

This new law will be assigned a number under Chapter 481 of the Hawaii Revised Statutes, which is the Fair Trade Regulations chapter.  Specifically, it will be under Part I, the Unfair Practices Act.  Currently, there are about eleven states that have enacted similar disclosure requirements at the inception and immediately prior to the renewal of the contract type of laws.

The Rationale

The lawmakers hope is that with the use of “clear and conspicuous” language (as defined by the Federal Trade Commission’s standard) that this gives consumers a change to be fully apprised of the situation.  Namely, that there is an automatic renewal clause and what steps they have to take in order to stop the contract from renewal.
Basically, this is an attempt to shift the burden back to the entity issuing the contract so that consumers may not be bound to a contract for a period longer than they anticipated or finding themselves stuck with something they do not want.

Exemptions

Act 139 applies to almost everyone selling things to people under a consumer contract that is for a specific term of more than one month and contains n automatic renewal clause for a term of more than one month.  However, there are some exemptions made to certain entities:
  1. Financial Institutions, for the activities regulated under under Chapter 412);
  2. Insurers, for the activities regulated under their respective chapters, as follows:
  3. Insurance companies(Chapters 431);
  4. Mutual benefit societies (Chapter 432);
  5. HMOs (Chapter 432).

Last Word

If you are an organization that does not fall under the exemption you will need to take a look at your agreements and your processes of notification. While, the law is in effect, the substantive portion does not go into effect until next year, July 1, 2012.  Therefore, it gives you some time to review.  So consider the following questions
  1. Do you let the consumer know what the terms of automatic renewal are?
  2. Is it clear and conspicuous in the agreement?
  3. Do you have a system that monitors contracts and sends out notices when their term is almost up?
These are some of the things to think about and have an attorney conduct a legal audit and review of all your contracts so you can update them.  By the way, if you don’t know what “clear and conspicious” means in terms of written agreements this is the definition:
  1. means in larger type than the surrounding text;
  2. in contrasting type, font, or color to the surrounding text of the same size; or
  3. set off from the surrounding text of the same size by symbols or other marks in a manner that clearly calls attention to the language.

If you liked this post or any of my other series please “Subscribe” to this blawg to receive e-mail updates.  I would recommend subscribing, as I will be doing the Boilerplate Blurbs (explaining regularly used clauses) sporadically.  In addition, follow me on Twitter and “Like” me on Facebook.

If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

For this week’s Draw the Law, you all chose Non-Compete Agreements.  This is definitely a topic of interest among employers and lawyers alike.  In addition, small business owners should remember I talked about non-competes in the context of buying a business.

What is a Non-Compete Agreement?

Before getting to what a non-compete agreement, you have to realize as our economy has grown and changed over the years, we now are in a knowledge economy.  Therefore, it is imperative for companies to not only protect their traditional intellectual properties, but the knowhow that gives them a competitive edge.   Through laws and agreements, like the Hawaii Trade Secrets Act and non-competes, companies have sought to enforce their proprietary rights against others.

A non-compete agreement tries to prohibit or limit the degree in which an employee can compete with their former employer.

Problems with Non-Competes

I tell this to many clients who come to me for drafting agreements, “I can put whatever you want in the agreement, but at the end of the day it matters if the court will enforce it.”  So it is the case with  non-competes, many employers want to make it impossible for their former employee to basically work.  This is not going to fly with a court because as a society, we value trade and the ability to make a livelihood for yourself.  Thus, courts will closely scrutinize these agreements because by their inherent nature they restrict trade.

The Law’s Balancing Act

The calculus the court usually enters when trying to decide whether to enforce or strike out the non-compete agreement is as follows:

A vs. B + C, where

(A) is the company’s interests at risk (trade secret, proprietary information, investment in the employee) VS. (B)is the employee’s ability to make a living + (C) is the“public good” (access to goods and services).

Therefore, a court will ignore a company’s non-compete with an employee if the risk is minimal to the company and enforcement would leave the employee unable to earn a living and harm the public.

The Factors

Specifically, a court looks to the following factors when make determinations on the aforementioned balancing equation:

  1. duration of the restriction (is it for six months or till the end of time?)
  2. geographic restriction (is it a part of a district on an island or is it the whole state?)
  3. the scope of the restriction (is it a specific level of job or is it the whole industry?)

What those Factors Mean When Creating a Non-Compete

Therefore, the tricky part of drafting a non-compete is to make sure you do not draft something so broad it prohibits an employee from working on this planet, in the same industry, for as long as he or she lives.  That is overbroad and a court would definitely not enforce it.

On the other hand, if you make the non-compete so small in its restriction (i.e. you can’t work in this building, for a day, as a payroll manager, and the person has HR operational skills learned at your company) then there is no point in creating the agreement because your former employee will just take all the knowledge and experience you invested in them and work for your competitor.

Final Words

Thus you are left with creating a non-compete agreement somewhere in between those extremes.  It always is best to have an attorney work with you on this matter.  Let them see how your business works and what is of value, but also how the employee you want to sign the non-compete will operate within the company.  It will help them craft an agreement that zeroes in on protecting the valuable knowledge, but allowing the former employee to make a living without using that stuff against you should they ever leave.

Finally, a brief word on independent contractors (IC) and the use of non-compete provisions, as stated in the other Draw the Law post on ICs, the issue of control comes up.  If you think about it, a non-compete is controlling the behavior of the IC.  Therefore, too much control (restrictions) on the IC may make them an employee in the IRS’s viewpoint.

Consider using a non-disclosure agreement instead to protect sensitive information when dealing with ICs.

As always if you like this post or any of my other series please “Subscribe” to this blawg to receive e-mail updates.  In addition, follow me on Twitter and “Like” me on Facebook.  If you need to contact me directly, please e-mail me at Ryankhew@hawaiiesquire.com.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.