Spross & Associates, PLLC

Open Source in Deliverables

If you are a buyer of coding services, why should open source in the Deliverables concern you and what can you do to protect yourself?

 

Open source code in your deliverables can be a major problem.  It may open you up to potential intellectual property infringement actions or, during due diligence, it may torpedo an acquisition.

 

So, what do you do in your consulting agreements?

 

First, request a representation and warranty stating that there is no open source in the Deliverables.  More specifically, I like to say that there is no code that is governed by viral license agreements.

 

Second, I do not distinguish open source contained in the Deliverables from the Deliverables themselves.  When I ask for warranties and indemnification, they apply to “Deliverables” and everything included in those Deliverables.  That way, the consultant is on the hook for the entire Deliverable.

 

If the consultant is unwilling to provide the warranty and/or the indemnification, then I require that any open source and other third party code must be preapproved in writing before being included in a Deliverable.  Absent your written approval, the source code is treated as part of the Deliverable and, therefore, not excluded from the warranty or indemnity under any circumstances.  If open source is included in the Deliverables, make sure that you also get a copy of the applicable open source license and have it reviewed.

Fax/Scan the Whole Document

There are a lot of folks that like to only fax or scan a signature page or the first page and a signature page when returning an agreement.  I know, it saves paper and fax time and disk space.  That is not a good enough reason not to send the whole document.  Think about how easy it is to slip in another page 2 that contains provisions that you did not agree to.  Even easier and almost undetectable is adding or removing a “not”.  That can be a disaster down the road.

Do not take the easy path on this one.  Scan or fax the entire document.

Why do you see a “By” prior to a signature in a contract?

The “By” prior to a signature simply means that the signer is signing the document on behalf of a company and not on behalf of themselves. If someone signs a document without the “By” there are some interpretations that would put both the company and the signatory on the hook for liability under the agreement. So when signing as an officer of a company or on behalf of the company, make sure there is a “By” even if it is handwritten.

Here is an example:

ABC, INC.

By:______________________ (signature)

Tricky Vendors and Signatures

One thing I recommend is that business owners and management periodically send out a reminder that employees are not to sign ANYTHING, no matter how innocuous, without the approval of management.  This includes documents that the other party says are just standard.  I know many people that have been burned by a shady vendor having company employees sign something when the vendor knows the employee is not authorized.  You as the company owner are left holding the bag because most of the time the dispute is in the price range where it doesn’t make sense to litigate.

So be careful and continue to reiterate to employees not to sign or “approve” anything without management or legal approval.

Doing Deals without a Contract

It is important to understand that the last six or so decades of business/commercial law in our country has been focused quite a bit on saving the American worker, inventor, and artist from big bad Corporate America.  So, we wind up with law and public policy that favors the individual and small company at the expense of the big company, especially where relationships are concerned.  The law assumes and expects the big company to be the mature, careful, knowledgeable, and responsible party.  If the big guy messes up, does not sign a contract with the small guy, or gets lazy, the default law favors the smaller guy far more often than not.  This is generally true in European countries too.

Doing a handshake deal is often a poor long-term choice for the big company.  Unfortunately, it is also the fast and easy choice, especially in an environment where everyone is busy and under time pressure.  Just note that if you take the quick route, the deal is probably not in your favor.  Often, the lawyers on the back end can do little for you too, and if they can, it is expensive.  No less than $500k for commercial litigation, no less than $2M for a tech-heavy IP suit, not to mention the time you and your team will lose in litigation.

Doing a bad deal or the quick “sign the form” deal is often not a good choice either.  Under United States law, there is a strong public policy doctrine called Freedom of Contract that is sitting on top of the “protect the little guy” policy.  It means that, as an American, you have the right to do any deal you want on any terms you desire.  However, as a consumer or a little guy, there are certain things that Uncle Sam does not allow a big retailer, a mortgage company, your bank, etc., (collectively “the big guys”) to do to you.  So, no consumer bothers to negotiate when buying a shirt at Wal-Mart.  You are protected from being really blind-sided or being treated unfairly by some protective default United States consumer law.

That is not always true for companies though.  As a company, United States Freedom of Contract means you have a patriotic, American, God-given right to be taken advantage of and totally pummeled into the ground until you are bankrupt, and the courts will often sit back and let you kill yourself with bad deals if you are so inclined.  So, you need to make sure you enter relationships properly and under clear contract terms you understand, appreciate, and can live by.

Conflict of Law Provisions

Everyone has seen it in their contracts and wondered what it means.  It is always in the miscellaneous section at the end of agreements.  It usually says something like, “without regard to the conflicts of law provisions therein.”  The full text is “This Agreement shall be governed by the laws of the State of Texas, without regard to the conflicts of laws provisions therein.”  Why is it included?

This provision is used to take interpretation of an agreement outside of the state law where a cause of action occurs.  For instance, if you have an agreement with a company that is in California there could be a cause of action that arises in California.  However, you want the laws of Texas to apply.  You have added a “choice of law” provision for that very reason.  Unfortunately, most states have a rule that says the law of the state where the cause of action arose governs that cause of action.  This would mean that if the cause of action happened in California, even if you said you wanted Texas law to aply, Texas law would point back to California.  By adding the "without regard to the conflicts of law provision" we are able to negate the Texas law that points back to California.  that is why most choice of law provisions contain the described clause and you should think about verifying that your's does too.

Are website terms and conditions enforceable?

The answer to this question is…it depends.

The static link terms and conditions that are contained at the bottom of most websites are most likely not enforceable.  This is because it is possible for the website user to never come across the terms and they are highly unlikely to read them.

For the terms and conditions to be valid, a user must actively click a button that says “I Accept” the terms and conditions.  The terms and conditions must be shown to the user prior to clicking in the button.  In addition, the user must be receiving something in return for clicking the button (for instance more access to the website or the ability to purchase items).  The website owner would then have a database with the user name and timestamp of the click. 

General Overview

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