The High-touch Legal Services® Blog • For Startup Companies

Having helped more than a dozen foreign companies set up operations here during the past few years, I am pleased to offer “Ten Tips for Success in the U.S.” on the Downloads page – just sign up using the drop-down list in the sidebar.

Here are the titles of the ten tips, which are discussed in greater detail in the document:

1. Work with complementary businesses that are already established here
2. Manage overseas personnel on the principle “trust but verify”
3. Form your corporation or limited liability company properly
4. Be ready for a legal system that is different from the one back home
5. Identify and protect intellectual property (IP) that is used here
6. Develop detailed employee and independent contractor agreements
7. Choose an accountant with international tax experience
8. Be prepared to obtain a federal employer identification number
9. Conduct due diligence on potential investors
10. Agree on business terms before you prepare a written agreement

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

“A verbal [sic] contract isn’t worth the paper it’s written on.” - Samuel Goldwyn

Sometimes I am asked whether an oral (as contrasted to written) agreement is enforceable. This post will answer that question but will explain why, even when an oral agreement is enforceable, it should be put in written form, anyway.

Generally, oral agreements are enforceable in California. There are, though, many exceptions. For example, an agreement for the sale of land or any agreement to the extent that it will require performance after one year must be in writing (Civil Code Section 1624), as must a premarital agreement (a “prenup”) (Family Code Section 1611). Also, a written agreement generally may be amended only in writing and not orally (Civil Code Section1698).

There are exceptions to the exceptions, however. For example, if both parties perform their obligations under an oral agreement that, according to statute, must be in writing, then a court will enforce the agreement even if it is only in oral form. This situation might occur if, both parties having performed, one party believes that the other’s performance was inadequate.

There are both business and legal reasons to avoid oral agreements, even when they are enforceable:

• Without a written agreement to refer to, it is too easy for the parties to have different understandings of the deal terms, possibly setting the stage for a dispute down the road.
• If a dispute results in a lawsuit, then the already-high costs of litigation will be increased if the parties have to pay their attorneys to battle over what an oral agreement really said.

Whenever negotiations with another party reach the point where there is agreement on essential business terms, that’s the time to say “Let’s put this agreement in writing as soon as possible.”

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

I just made available on the Downloads page (sign up using the drop-down list in the sidebar) “Top Ten Legal Tips for Independent Contractors,” a document that describes how independent contractors can avoid exposing themselves to unnecessary legal risks.

Here are the titles of the ten tips, which are discussed in greater detail in the document:

1. Choose the right type of legal entity for your business
2. If you choose a corporation or LLC, comply with applicable formalities
3. Buy the right types and amounts of insurance
4. Identify and protect your intellectual property
5. Use your form of client agreement whenever possible
6. Be careful when assigning or waiving intellectual property rights
7. Be careful when collaborating or subcontracting
8. Be careful with nondisclosure / confidentiality agreements
9. Avoid oral agreements whenever possible
10. Understand what distinguishes independent contractors from employees

For more information about distinguishing independent contractors from employees (tip 10), please see Avoiding the “Independent Contractor” Trap.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Megan Meier, the victim

Lori Drew is the woman who, using Myspace in 2006, cyberbullied 13-year-old Megan Meier into committing suicide.

Drew’s actions were, without question, reprehensible. The interesting issue for this post, however, is the U.S. government’s decision to bring criminal charges under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. Section 1030.

Read more…

Two U.S. District Court cases – Io Group, Inc. v. Veoh Networks, Inc. (8/27/2008) and UMG Recordings, Inc. v. Veoh Networks, Inc. (9/11/2009) – offer a recipe by which Internet-based service providers can avoid liability for user-provided content.

Update: UMG v. Veoh was affirmed by the Court of Appeals for the Ninth Circuit on December 20, 2011.

The cases are similar. Veoh operates an Internet-based service that allows users to share videos with others free of charge. Io and UMG (Universal Music Group) brought separate suits, each alleging that Veoh engaged in various forms of copyright infringement because it allowed users to upload videos that infringed the plaintiffs’ copyrights.

In each case, Veoh obtained a summary judgment in its favor based on compliance with the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA), codified at 17 U.S.C. Section 512 (Limitations on liability relating to material online).

Read more…

On October 14, 2009, I will make a presentation to the Berkeley chapter of the Society for Technical Communication. The topic: Ten Legal Tips for Current and Would-be Independent Contractors.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Abercrombie & Fitch trademark infringed or allowable parody?

I took a Holland America cruise to Alaska last week. While I Ketchikan at The Outlet Store on Thursday, I saw an apparent case of retail-goods trademark infringement.

(Yes, I realize that thinking about trademark infringement while on vacation is a symptom of serious geekiness, but there’s not much I can do about that.)

Note: This post has been updated based on comments received (please read them to see the more complete picture).

When I first saw the display (see photo), I assumed (erroneously) that the products were not actual Champion products: I could not believe that Champion apparently was claiming that “Abercrabie & Fish” was an “authentic” mark of Champion in light of the many trademarks registered by Abercrombie & Fitch. (I found no trademark registration for “Abercrabie”.)

The Outlet Store has informed me, however, that (a) the goods actually are Champion goods and (b) in its opinion, the goods are protected as a parody because at least ten percent of the (Abercrombie & Fitch) design has been changed.

I’m not sure, however, that the parody defense is as readily available as The Outlet Store claims, particularly because of the presence, next to the goods, of the acrylic display that associates “Abercrabie & Fish” with “Champion” and uses the term “AUTHENTIC”. That display (a) seriously undercuts any parody argument and (b) easily could create consumer confusion about the source of the goods.

In any event, it will be interesting to see whether and how Abercrombie & Fitch and Champion respond.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Twice within the past 24 hours, a client has contacted me with concerns about trademark protection. In each instance, the concerns were caused by an e-mail that offered specified domain names in Asia. I will describe the e-mails in detail so you will know to be on guard if you receive anything similar:

1. The subject line includes terms such as “copyright” or “intellectual property.”
2. The text indicates that the sending company, an Internet domain registrar located in Asia, has received a request to register domain names with country codes in Asia that are similar to a “trademark” (more precisely, a domain name) that you own. For example, if you own <universalwidgets.com>, the e-mail might state that there are requests to register <universalwidgets.cn> and <universalwidgets.asia>.
3. The e-mail then offers you an opportunity to protect your trademark by buying the Asian domain names yourself, rather than letting them be purchased by the third party. However, to take advantage of this opportunity, you must act quickly.
4. The individual ostensibly sending the e-mail has an Americanized name, such as “John Zhou” or “Adam Hao”.

Read more…

Yesterday I wrote about ways that businesses with two equal owners can avoid management deadlocks (Resolving Small-business Disputes: The 50-50 Deadlock). Today I am writing about dissolution, i.e., termination of the company’s existence – the only reasonable outcome if a serious deadlock cannot be resolved.

The essence of the dissolution process for a California corporation is as follows:

• Read more…

On occasion when I help a client form a new corporation or limited liability company (LLC), the company will have two owners, each owning 50% of the company.

A major risk with 50-50 ownership is that disagreement on an important issue can deadlock the company. In an extreme situation, the dispute might even put the company out of business!

Read more…