Wednesday, September 24, 2008

Corporate Dealmaker Conference

I'll be moderating a panel on "extreme dealmaking" at next week's Corporate Dealmaker forum in NYC. I've also signed up for twitter - find me at @corporatetool on twitter.

Thursday, September 18, 2008

Rolling Heads

Former McAfee GC Kent Roberts - rogue options backdating agent, or poor sap thrown under the wheels of the corporate bus? God knows we in-house counsel are ready and willing to take the blame for things our companies want to do or not do - within the bounds of the law, of course. But stand trial with jail time on the line? Methinks not.

Was Roberts - whose federal court trial was to start yesterday - left twisting in the wind by McAfee? The company has suddenly found a bunch of emails that apparently may exonerate Roberts. As for the company and the attorneys who missed this discovery the first time around? "Heads have to roll" - that's the word from U.S. District Judge Marilyn Hall Patel.

Tuesday, September 09, 2008

More on Google's EULA

PC World ran a comprehensive piece yesterday (including some analysis from yours truly) on the quirks of Google's terms of service and how the company claims a license to a whole bunch of user content across multiple products (Chrome, Picasa, Blogger, etc.).

Some people have wondered why I think Google won't use this license claim in a more affirmative fashion - as the argument goes, what's to stop Google from taking advantage of some particularly valuable piece of content that gets posted to Blogger or Picasa? I mean, what if the movie version of Corporate Tool is a global blockbuster - how can I be sure that Google isn't going to capitalize on my success?

Two reasons: First, Google's primary concern with having a license is to avoid operational or legal problems in running its site. It doesn't want to have to worry about copyright clearance or the like when making changes to its sites or products. Why does this matter? Because there is a fundamental difference in the strength of the company's claim between this "defensive" use and any use of the claim proactively to establish IP rights.

Secondly - and related to the business judgment that would make Google think twice before using its license claim proactively - Google is a multi-billion-dollar behemoth that makes money hand over fist, at unbelievable margins, from its advertising sales. Do you really think they'll see a viable business opportunity in pursuing a shaky-at-best licensing claim to your beach photos?

Wednesday, September 03, 2008

Overreaching Contracts

Credit card companies, telecom operators, website publishers and software developers are all familiar with the need for standard, easily-applied agreements that customers sign up to by default when using the service.

While these agreements come in many names and forms ("shrink-wrap" for packaged software, "click-wrap" for downloaded software or software-as-a-service, "End User License Agreement," "Terms of Service," "Terms of Use" or "Customer Service Agreement" for websites or telecom providers) they all have one thing in common - they are contracts of adhesion, meaning the end user is stuck with them if they want to use the service.

There's nothing wrong with this per se - some form of agreement needs to surround these services, and such terms obviously can't be negotiated individually with every user. However, as today's kerfuffle over the terms of service for Google's new Chrome web browser shows, a company's lawyers need to pay attention to what these terms say and whether they are fair in the context of a contract of adhesion.

Why? For starters, while most anything goes in a fully-negotiated agreement, courts will quickly find a contract of adhesion unconscionable if the terms are overreaching. After all, the consumer has no other choice but to vote with their feet (and sometimes they don't even have that choice). The Washington Supreme Court recently decided a case (see Groklaw for a terrific discussion) that offers a classic look at the far reaches of unconscionability - an AT&T customer service agreement that, in addition to requiring arbitration of disputes (usually OK, even in adhesive contracts), also barred class actions, required all proceedings to stay secret, shortened the statute of limitations to bring actions, and limited consumer rights to sue for attorney's fees, while giving AT&T the right to do so (this last point wouldn't fly even in a fully negotiated contract in many states, including CA and WA).

While the Google lawyers apparently were just a little sloppy in applying terms from other services to Chrome, AT&T's lawyers must have just felt compelled to make their terms as one-sided as possible.

The problem is that this kind of overreaching has its costs. If you're AT&T, the only terms above that really make much difference are the arbitration clause and the class action waiver. The rest of the stuff is noise. However, it's so blatantly one-sided that a court couldn't help but trash all of these clauses; indeed, AT&T is lucky the entire agreement wasn't stuffed.

What would have happened if they had kept the agreement scrupulously fair on the procedural side but had retained the important limitations (arbitration and class action waiver)? I say there's a fair chance the court would have upheld their agreement. Instead, their eagerness to craft a lopsided agreement cost them what they really cared about. Nitwits.