Tag: Business lawyer

Ricardian Contracts

Contracts, Digital Signatures, Smart Contracts, Technology, Uncategorized

Ricardian Contracts are really a stepping stone to Smart Contracts.  They are a way to link a contract to another system, typically an accounting system.  Ian Grigg came up with the Ricardian Contracts some time ago.  He first published about it in Financial Cryptography in 7 Layers in 1998.  Ricardian Contracts were initially used for Ricardo (hence their name), a bond platform.

They are a melding of a traditional contract with a contract that can be read and executed by machines. A Ricardian Contract can be defined as a single document that:

  1. is a contract offered by an issuer of some item of value (think of a bond, coin, token, currency, etc.) to a holder of such item;
  2. for a valuable right held by the holder, to be managed by the issuer;
  3. can be read in plain language by humans (so like a normal contract);
  4. can be read by programs (and is parsable like a database);
  5. digitally signed;
  6. carries the keys and server information; and
  7. is allied with a unique and secure identifier.

Read more

New York’s Blue Sky Securities Laws – A Primer for Startups and Other Issuers by Michael Stanczyk

Accredited Investors, Angel Investors, Broker-Dealers, Crowdfunding, Financing Your Business, Investors, Private Placements, Securities, Stock, Venture Capital

3d blue sky bookAs a younger lawyer I was regularly working on securities offerings.  For the bulk of the offerings they were private placements to accredited investors under SEC Rule 506(b), which involved filing a Form D and state notice filings.  In most states it was pretty straightforward. New York, however, was not straightforward then, and still remains a mystery to many people.  Over the years I searched for a book that covered the basics of New York’s Martin Act (the law covering securities offerings in the State), but never found exactly what I was looking for.  I kept working on deals and writing posts for this blog (in addition to memos and white papers, etc.), and over time I compiled a decent amount of information and knowledge of the subject and decided to put it all into one place.  Next thing you know I had the beginnings of a book.  Link to see it on Amazon here.

Now I don’t profess to being a specialist in the field of securities, as there are many complexities and rabbit holes to go down if you get outside the more “vanilla” type offerings. Startups, emerging companies and even investment funds, however, generally are raising money through private placements under SEC Rule 506(b). This book gives the basics and is, like its titled, a primer.  I tried to walk a fine line to allow it to be read by non-lawyers, with enough citations to assist legal practitioners.

Admittedly, this book is a niche product.  The prospective audience is those whose companies are looking to raise money, or individuals otherwise involved in some aspect of companies raising money.  I hope it can be helpful to such individuals, including younger attorneys just getting started in the field.

In any event, the book is for sale in paperback and e-book on Amazon.   I personally feel the paperback is easier to read and to flip back and forth to things, and to view the exhibits and addenda, which should be consulted. I have a number of copies of the book, and if any friends and colleagues of mine (which I knew prior to this post) would like a free copy , feel free to reach out.  Thanks for the support.

M&A Deals: What is a “Cap” and a “Basket”?

Contracts, Mergers & Acquisitions

This is a follow up post on our series of merger and acquisition issues.  If you are selling your company you’ll be faced with the prospect of indemnifying the purchaser for any damages they suffer in connection with the sale.  Now such indemnification may arise for a number of reasons, such as an unknown debt or lien that was on an asset you sold, a claim that an employee or third party made against the company or an asset which you did not inform the purchaser of, or a number of other issues.  These are usually breaches of the representations and warranties that sellers have to make to the buyers in the asset purchase agreement.   For example, the seller will represent (i.e. state as true at the time of signing or closing or both) that there are no debts owed by the company or liens on the company assets.  If the deal closes and a lender or lien of the company did exist, its a breach of that representation, and the seller is liable to the buyer for any resulting damages. Read more

Is your Trademark License Agreement really a Franchise Agreement? In New York the answer is “Yes”

Intellectual Property, Licensing, Trademarks

Most companies licensing the use of their trademarks would not think that a simple license agreement, which provides nothing more than use of the trademark in exchange for a fee, would for legal purposes be treated as a franchise agreement.  But if the trademark licensor is in New York then what it thought was a simple trademark license agreement relationship is likely really a franchise arrangement. Read more

Clickwrap License Cases: Other/Misc

Contracts, Internet Law, Online Agreements
  • Starke v. Gilt Groupe, Inc., 2014 U.S. Dist. LEXIS 58006 (S.D.N.Y. 2014) (arbitration provision in clickwrap license, which had a link to the text of the license, was upheld, and found not to be unconscionable).
  • Motise v. America Online Inc., 346 F. Supp 2d 563 (S.D.N.Y. 2004) (user that signed on with another user’s id and password still bound, as sub-licensee, of the terms including forum selection clause).
  • Hoffman v. Supplements Togo Management, LLC 18 A3d 210 (N. J. App. Div. 2011) (found forum selection clause unenforceable due “the manifestly unfair manner in which defendant’s website was structured” and court seemed to imply that it believed the website owner was intentionally hiding the terms).
  • Caspi v. Microsoft Network, LLC, 323 NJ Super 118 (N.J. App. Div. 1999) (upheld forum selection clause where users had to click on scrollable window and click “I agree” or “I don’t agree.”)
  • Mortgage Plus, Inc. v. DocMagic, Inc., 2004 WL 2331918, 2004 U.S. Dist. LEXIS 20145 (D. Kan. 2004) (clickwrap agreement upheld)
  • Taxes of P.R., Inc. v. TaxWorks, Inc., 2014 U.S. Dist. LEXIS 37765 (D.P.R. 2014) (upheld forum selection clause in clearly stated clickwrap agreement, following ProCD precedent).

Clickwrap License Cases: Treiber & Straub, Inc. v. UPS, 474 F.3d 379 (7th Cir. 2007)

Contracts, Internet Law, Online Agreements

Treiber & Straub, Inc. v. UPS, 474 F.3d 379 (7th Cir. 2007).

I think this case gives a more “substantive” holding than some of the other cases which merely hold that procedural items are enforceable, such as forum selection, class action waivers, etc.  This case actually enforces UPS’s online shipping website’s Terms of Use to the detriment of the shipper.

In this case, a user shipped a ring worth $100,000 via UPS’s online shipping website.  He submitted the ring in a package for shipping with the shipping label.  UPS then lost or misplaced the package.

In order to ship the ring the user had to click not once, but twice, to agree to UPS’s websites shipping Terms of Use.  The terms provided that UPS would not be responsible for any item of “unusual value” which it stated was anything over $50,000 (which is the maximum amount UPS let you insure an item for).

The shipper then put in a claim with UPS, and UPS disclaimed stating it did not have to pay him anything because it was an item of unusual value. The shipper then sued for the value of the ring and the court upheld UPS’s Terms of Use, finding that UPS provided adequate notice on its website to anyone shipping an item.

The Court held that using a clickwrap agreement for online transactions was “common in Internet commerce” where “one signifies agreement by clicking on a box on the screen.”  The court reasoned that merely because the user chose not to read the terms, that does not let him avoid any of the provisions he does not like.

Clickwrap License Cases: Davidson & Associates v. Jung, 422 F.3d 630 (8th Cir. 2005)

Contracts, Internet Law, Online Agreements

In Davidson & Associates v. Jung, 422 F.3d 630 (8th Cir. 2005), the Court of Appeals for the Eighth Circuit upheld a clickwrap agreement that prohibited reverse engineering. In that case, the clickwrap agreement that had to be accepted prior to playing the online game prohibited reverse engineering.

The clickwrap agreement was included in the End User License Agreement that each user had to affirmatively agree to (by clicking on “I Agree” button) when installing the game, and you could not play the game without agreeing. Users also had to enter a CD Key which was included on the copy of the CD the game came on. The CD Key was connected to the CPU’s IP address to prohibit pirating and copying of the CDs.

Certain users, unhappy with the games’ performance and the system used to play the online game, reverse engineered the game and created their own site to play it against others on the game maker’s site.  Blizzard, the game maker sued.

The Court of Appeals for the Eighth Circuit upheld the clickwrap agreement provision that prohibited reverse engineering, stating that the users had expressly relinquished their right to reverse engineer by agreeing to the terms of the license agreement.

There were various other copyright claims, and the court also held that the users violated the Digital Millennium Copyright Act, which seemingly made ruling against the users easier.

 

Clickwrap License Cases: Patterson v. Compuserve

Internet Law, Licensing, Online Agreements

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 then 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.

The 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.

The 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.