Who Should Indemnify Whom, and for What?

Posted on November 6, 2011 by

When does an indemnity clause belong in an IT agreement? Without some rule or guiding principle, you’ll find it difficult to negotiate indemnity requests. You’ll find it hard to know when the other party’s request is reasonable, or when your own indemnity request makes sense and you should stick to your guns. Fortunately, the logic of indemnity does reveal a guiding principle. An indemnity makes sense where one party creates a risk that the other will be sued—and the suit is either very likely or would cost a lot to resolve. Continue reading →

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Instead of a “Feedback License,” Draft a Disclaimer of Idea Restrictions

Posted on October 14, 2011 by

In last week’s post, I addressed the myth of idea ownership. I explained that no one can own an idea. I also argued that, therefore, no one needs a “feedback license.” In a feedback license, a company’s contractors or partners give it a license to any suggestions they provide about the company’s products or services. Since no one can own an idea, the premise behind a feedback license makes no sense. There’s nothing to license. But some companies still worry about receiving feedback; they worry that rights of the contractor or partner will keep them from using the idea. I think the concern is far-fetched in a relationship with another business (perhaps less so in a consumer relationship), but it’s not nonsensical. The main worry is that some sort of unwritten contract will restrict use of feedback. Fortunately, there’s a solution so easy that it’s worth the effort, even if the concern is far-fetched. Instead of a feedback license, draft a disclaimer of any obligation not to use feedback. Continue reading →

Posted in Intellectual Property, Software Licenses, Transactional Clauses | Tagged , , , , | 2 Comments

No One Can Own an Idea (So You Don’t Need a “Feedback License”)

Posted on October 6, 2011 by

Technology companies often worry about ownership of ideas they hear. If a contractor or partner gives us an idea, do we need a license to use it? What if it’s an idea about our own product or service? The concern often prompts a “feedback license”: a sentence or two tacked onto a contract about professional services or co-marketing or something like that, granting a license to “any idea Contractor may develop related to Company’s products.”

The good news is that you don’t have worry about ownership of feedback or other ideas. You don’t need a feedback license, and in fact, they don’t even make sense. In the United States (and most other countries), ideas belong to everyone—at least to everyone who hears them legally. Continue reading →

Posted in Intellectual Property, Software Licenses | Tagged , , , , , , | 8 Comments

The Contract Negotiator’s #1 Tool: MS Word Redlining

Posted on September 21, 2011 by

This post departs from our usual discussion of contract terms and talks about redlining and redlining software. A redline (sometimes called a “blackline”) provides a quick and easy view of the differences between a new contract draft and an old one. Usually, redlining software underlines added terms and strikes through (crosses out) deleted terms, but leaves the deleted terms legible. Redlining isn’t difficult, but doing it wrong can delay negotiations and even lead you to sign terms you didn’t mean to accept. Continue reading →

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Don’t Use License Agreements for Software as a Service

Posted on September 12, 2011 by

Most IT contract drafters know the difference between a software license agreement and a technology services contract. In a license, the recipient gets rights to copy and use a software application, while in a services contract, the recipient gets a service, like tech support or IT consulting. But software as a service (SaaS) seems to throw a wrench into the gears. Which is it? Fortunately, the new landscape isn’t actually all that confusing (or all that new). SaaS agreements are services contracts, pure and simple. They don’t call for software licenses. Continue reading →

Posted in Data Security, Indemnity, Promise of Software as a Service, Service Level Agreement, Software Licenses, Transactional Clauses, Uncategorized | Tagged , , , , , | Leave a comment

Don’t Use Nondislcosure Clauses for Private or Electronic Data — Use Data Security Clauses

Posted on September 1, 2011 by

When one party has to protect information belonging to the other, we tend to pull out a nondisclosure agreement: an NDA. Or if we don’t want a separate NDA, we add the NDA’s key provisions to our tech contract as a confidentiality or nondisclosure clause. That makes sense if we’re trying to protect trade secrets and the like: source code, customer lists, secret sauce, etc. Lawyers of the olden days designed NDA’s for exactly that purpose. But what if we’re protecting private information, like social security numbers, health records, or credit card numbers? The NDA’s creators didn’t have private information in mind, and NDA’s don’t protect them well. Nor do NDA’s work for data in electronic form–which is how most private information gets stored, along with a lot of other sensitive data. Large stores of electronic information call for a newer creature: the data security clause. Continue reading →

Posted in Data Security, General Clauses, Nondisclosure / Confidentiality | Tagged , , , , , , | 3 Comments

Don’t Choose Delaware Law Unless You’re in Delaware

Posted on August 22, 2011 by

In a recent IT contract negotiation, the other party’s lawyer insisted that the choice of law clause call for Delaware law and courts. His client wasn’t based in Delaware and neither was mine. And our IT project wasn’t happening in Delaware. Why then choose Delaware law? Because Valerie Bertinelli comes from there–or because it was the first state to nominate a self-declared witch to the U.S. Senate? No. “Delaware has the best laws,” replied my negotiating counterpart. That’s a claim you hear a fair amount, but it’s based on a misunderstanding. Delaware has a special claim to quality corporate laws. But the Delaware advantage doesn’t apply to the laws governing IT contracts. Continue reading →

Posted in Choice of Law, Supporting Clauses | Tagged , , , , , | 4 Comments