Clickwrap License Cases: Patterson v. Compuserve @ Paper This Deal

Compuserve v. Patterson, 89 F.3d 1257 (6th Cir. 1996).

–Patterson, a resident of Texas (a lawyer and software programmer), sold his own software to third parties over Compuserve’s system, pursuant to the terms of a clickwrap agreement (where he had to type “I Agree” into various sections of the agreement).

  • Compuserve began to sell its own software that was similar to Patterson’s and Patterson demanded Compuserve pay him $100,000 as a settlement.
  • Compuserve filed a declaratory judgment action in Federal court in Ohio.
  • Patterson moved to dismiss the action due to alleged lack of personal jurisdiction, claiming he never visited, did business in, or consented to suit in Ohio.

–Sixth circuit found that making Patterson subject to suit in Ohio due to his acceptance of the clickwrap agreement, a Shareware Registration Agreement, did not violate the due process clause of the United States Constitution.

–Court reasoned that Patterson personally availed himself to do business with Compuserve, and made money doing so, and could therefore have reasonably expected he’d have to defend himself in Ohio due to the terms of the agreement.

The “Godfather” of the Shrinkwrap Cases: ProCD v. Zeidenburg @ Paper this Deal

This is the seminal case in the shrinkwrap realm, which paved the way for the rise of the browsewrap and shrinkwrap cases.  Upholding the software license as normally provided to purchasers, to get around the First Sale Doctrine under U.S. Copyright Law.   Cite, facts and holding are below.  Continue reading

Best Practices for Drafting Browsewrap and Clickwrap Agreements @ Paper this Deal

There’s still some hostility from the court system, and the public at times, on the enforceability of browsewrap and clickwrap agreements. Having an enforceable license for your website, software or mobile application is of the utmost importance.

The ABA Committee on Cyberspace Law provided general rules to ensure your online agreement is enforceable:

  1. The user must have adequate notice that the proposed terms exist;
  2. The user must have a meaningful opportunity to review the terms;
  3. The user must have adequate notice that taking a specified, optional action manifests assent to the terms; and
  4. The user must, in fact, take that action.

I fully agree with the above.  Notice, notice, notice is so important. But not just any notice.  You need to ensure that the notice is reasonable, that is that a reasonable person using your software/website/application would understand that by taking a certain action (clicking or continuing use of the site) it renders the agreement binding on them. My reading of the case law on shrinkwrap, browsewrap and clickwrap agreements made me come up with my own list in addition to the ABA Committee’s pointers:

  1. Create an easy to read, reasonable license that follows industry norms;
  2. Give the user reasonable notice that the license exists;
    • Make sure the notice is CLEAR AND CONSPICUOUS
    • Colors, size, font, placement, timing, etc. all relevant. Don’t “bury” it.  Get it in front of the user’s faces.
  3. Let the user read the full license if he or she so chooses (scrollable pop-up being preferred), prior to acceptance (click or use);
  4. Opt for clickwrap over browsewrap if possible.

 

 

Paper this Deal Book Review: PLI’s Health Care Mergers and Acquisitions Answer Book 2014

We’re going to start a new series of posts on legal and business guides, treatises and books.  First up is PLI‘s Health Care Mergers and Acquisitions Answer Book 2014.

Health Care MA AB 2014PLI recently provided me a copy and I’ve used it in connection with a recent acquisition and generally for information needed for counseling a health care client.  The book provides insight into general counseling of clients in the industry,  including compliance, business and accounting/tax issues. It’s useful for more than simply M&A type work.

The way the book is set up is different than most legal texts (i.e. info dump) which is refreshing – it is called an “Answer Book” after all and is therefore comprised of answers to the most common questions about health care generally, M&A transactions generally and M&A transactions in the health care context. It also has information on the typical structure of these types of transactions, as well as case studies in the important precedent applicable.  Case law is inserted throughout for general propositions. Continue reading

Clickwrap and Browsewrap Agreements Kickoff @ Paper this Deal

I’ve been involved in drafting numerous versions of online agreements, including privacy policies, service agreements, pricing policies, various other policies and last but not least both browsewrap and clickwrap agreements.  I’ve done a quick post on case law with respect to browsewrap and clickwrap agreements in the past, and was recently asked to speak for a webinar entitled Drafting Clickwrap and Browsewrap Agreements: Advanced Strategies for Enforceable Online Contracts held by Strafford.  If you’d like to listen to the webinar email me or contact them.

I feel that more and more contracting is going to be done over the Internet in the future and I am going to start a series of blog posts on drafting these types of browsewrap and clickwrap agreements as well as case law in the area, which serves to let corporate lawyers know how they have to draft the agreement, and have the users accept it. Continue reading

Use your Retirement Plan to Fund your Startup @ Paper this Deal

First of all, I won’t advise anyone to withdraw their 401(k) funds early as the tax hit the IRS enacts is insane.  If you are thinking about doing that, please don’t, or at least don’t do so until you’ve spoken to your accountant.

This post will, however, detail how to use your qualified retirement plan or IRA to start a new, or buy an existing, business.  This name given to the process I’ll discuss is rollovers as business startups (“ROBS”).  The main gist is that an individual’s current retirement plan is rolled over into a newly established 401(k) plan sponsored by a startup company and then used to purchase the startup company’s stock.  The ROBS arrangement allows income taxes and penalties (see IRC Section 72(t))to be avoided because it is a rollover from one qualified plan to another. Continue reading

Ten Tips for Pitching your Startup to Investors @ Paper this Deal

I volunteer at a couple of small business incubators and programs.  I was sitting in on a mock pitch last week and giving some pointers on how the entrepreneur could polish their pitchdeck and overall presentation. I figured I’d put these up so people can take a look.  The below are offered to any startup looking to raise money: Continue reading