Hope you’re listening to some tunes that make you go:
Hope you’re listening to some tunes that make you go:
For many businesses, the way that you feel “legit” and announce your debut, is to put up a website. Most folks buy a domain name and find a website developer. Well, before bringing a website developer on board, it is a very good idea to negotiate and write up a website development agreement. On the other hand, it is NOT a very good idea to hire a website developer (or designer, or writer) on a handshake, friendship, verbal understanding OR EVEN by simply slapping the words “WORK MADE FOR HIRE” across the top of whatever contract you downloaded off of the internet or “borrowed” from a friend.
Why is that not acceptable? Because 17 USC §201(a) creates a presumption that intellectual property created by a third-party belongs to the creator and NOT TO YOU. Repeat, the law does not presume you own the intellectual property you pay to have created for your use, just because you paid for it. The law presumes you do NOT own the designs, the copy, the layout, or any of the other intellectual property you own UNLESS you have a written agreement that gives you those ownership rights.
Why does this matter to you? Most business owners don’t want to pay to have your website created and then ALSO pay a royalty to the developer for as long as they are using their own website.
What to do? Get it in writing. Your website development agreement must contain detailed provisions on ownership of the finished website and all underlying work product. Also, website development shouldn’t be an open-ended process. Attach a “Statement of Work” that describes how the website will look and what it will do. Most business owners know about “scope creep” – and this can be an issue for the developer as well as the business owner. A good lawyer will be sure to account for what happens if the project extends beyond the originally intended scope.
Of course every business lawyer should know that a website development agreement should be in writing and clearly identify who will do what by when for how much and who will own what.
1. the responsibilities of each party,
2. when items must be delivered or services performed,
3. how much development will cost and when payments are due, and
4. who will own the materials developed under the agreement.
But not every business lawyer should be expected to know…not unless he or she regularly deals with these issues…that your website development agreement should also include that “Statement of Work” (SOW) mentioned above as an attachment so that it can be amended and updated as changes are needed. The SOW should contain a detailed description of how the website will look and how it will function. The parties should include drawings, diagrams, images—anything to more clearly define the desired end product. This will not only make you happier but it should also help the website developer as well.
So while it is true that the “conventional wisdom” is that if you contract a creative person for a “Work for Hire,” you will implicitly own the resulting work, this isn’t always the case. And if you plan to build your business on your ideas and intellectual property, you don’t want to leave open the possibility that someone else could own it.
Let the March Madness begin! Who are you rooting for?
My team is always the Texas Longhorns…even if, lately, they haven’t been “contenders.” Win or lose, I bleed burnt orange! Speaking of the University of Texas, watch out for me at SXSW Interactive this weekend. I’m looking forward to scarfing down as many breakfast tacos as possible, all of the panels & workshops, and to all of the live music/events.
Colin has been reading a lot of books about start-ups and books about intellectual property – like the NOLO guide in addition to finishing “Thick Face, Black Heart” and “Adversaries into Allies.” He also is guilty of a “House of Cards” binge session and loves his “Shark Tank.” For the small business owners out there – would it be useful to you if your attorney had a lending library? What if you work out of a co-working space?
I am reading E&P Magazine Articles – exciting, I know! It kind of is for me, though. I am also still researching intellectual property issues – particularly those related to trademarks and copyrights – but also looking at requirements for Benefit Corporations (or Social Purpose Corporations), think of “Toms” as an example. It’s always good to stay current and there’s always more to learn! While reading has slowed down for me in the “read-for-pleasure” department, I *have* (insert: guilty face) been indulged in that “House of Cards” binge mentioned above and “Justified.” Sorry, books. I have been cheating on you with television. I’ll be better in March.
Colin has been digging Mac Miller, the Mary Onettes, and also been listening to some live Band of Horses via NPR/KEXP. We saw them at Sasquatch a few years ago and they were awesome.
My SXSW ramping has relied mostly on others so far (particularly hippohonk – check out their almost-too-extensive SXSW 2014 playlist on Spotify). This makes me feel slightly unprepared for SXSW but it all just sort of snuck up on me this year! I have been listening to a lot of Asaf Avidan, The Front Bottoms, The Mary Onettes, Vance Joy, Twin Forks and Warpaint. There is also the new Beck to listen to and countless other bands.
Colin also has been introduced to the joys of the HippoHonk playlist.
Do you have any suggestions for us? What should we put on our music and book list?
We get asked this question a lot. There are many answers, but today I will use one area as an example. I’ll talk about joint ventures. First…what is a joint venture? It’s when you partner up with someone in a formal way to make money together. Sometimes these partnering opportunities can happen at a networking event over drinks. At least, you and your potential partner can come up with an idea of how to make money at the networking event…but now you have to take that idea and turn it into an actual business venture. An attorney can turn those scribbled ideas on a cocktail napkin into a deal by acting as your deal-sherpa.
Wait, wait. Can you make money with a joint venture without an attorney? Sure. I’m sure that many of you have. BUT how many would-be deals have fallen through? And with the right help, how much money could you have made on those deals? Enough to make it worthwhile to invest in a deal sherpa. There are a lot of reasons joint venture deals, that should have worked out, don’t work out. Having an advisor who is removed from the situation can help you see the potential pitfalls and plan for them.
One reason a joint venture deal doesn’t work out is the people involved are not on the same page. You say this, she says that, he says this…and everybody means something different. You go promote to your client list, I’ll promote to my list. You do this. I’ll do this. Then you go back and don’t do anything because you have all this uncertainty. You don’t know for sure that the other person will follow through or if it was just a networking event-induced business frenzy with no follow through. You do not feel comfortable going out on a limb for this person.
So the deal fizzles out and nothing comes of it. Instead, if you had a trusted advisor to tell this business deal about while you do all of your follow up from the live event, that advisor could draw up a simple contract where everybody makes money together. A lawyer who knows your business and knows your industry will have an easier time moving the deal forward with less hand-holding.
Once everybody feels comfortable, then they are willing to go out on a limb and know its not going to fall out from under them. Putting the deal in writing helps to demonstrate your commitment to your partners and demonstrates that you expect the other person to do the same. Best part of it is that you will be able to keep getting clients and coming up with more ideas when you have a deal sherpa by your side. They’ll do most of the work that you probably find less interesting.
The deal needs somebody who can shepherd it from conception to reality. More successful deals equals more revenue for your business.
Do you have somebody on your team who helps make deals happen?
We try to focus on the positives during our blog posts because no one likes to read doom-and-gloom posts day in and day out. One big misconception that we want changed is the vision of an attorney as simply a roadblock to getting business done as opposed to an attorney as an advisor and business partner – someone that can help the entrepreneurs out there make deals happen.
This post is not about making deals happen. It is about how sometimes it’s good to have a speed bump so you’re not flying down the street blind to the dangers.
Example 1: Person 1 (P1), a small business owner, is approached by an international corporation. They would like to joint venture. In exchange, they need a business visa so that they can come to the U.S. and help out with said joint venture.
So, P1 does some research. Speaks to an immigration attorney. Figures out all of the things that need to be done to make this joint venture happen. All of this is without any money or signed contract(s). It’s simply the research before starting a new corporation to formalize this joint venture.
Example 2: Person 2 (P2), a small business owner, is approached by an international person through a friend-of-a-friend. They want to hire American subcontractors to perform work in China. They give some information about what they hope to accomplish but not many specifics. They ask for information on subcontractors and ask for research to get done and reported back to them. No money is exchanged and no contract is signed.
Example 3: Person 3 (P3), a budding entrepreneur, is looking for investment for his new project. He approaches some people and they suggest going the route of an EB5 visa. Get a foreign entity to invest $500,000-$1,000,000 in exchange for this visa (this is an extremely oversimplified version of the law) reserved for job creators.
Okay, so…in all these situations, we stopped the deals from happening once we got involved. In the first scenario, we asked for 6 months of costs up front to fund the creation of a corporation, including our legal fees, and no more work done towards that goal without consenting to that. This may seem harsh, but a foreign corporation wanting to start a business in the U.S. shouldn’t have an issue coming up with $50,000. The entity disappeared.
In the second scenario, we asked for a signed consulting agreement prior to any research being done/information exchanged. The foreign entity just kept trying to get free information. In the end, our client decided not to pursue anything else or decided not to pursue the venture because he decided that it was not the right joint venture for him.
In the third scenario, well, let’s be honest, the opportunity to receive that sum of money to pursue your dreams is tempting. However, after really talking through the client’s vision, I realized that this was not necessarily what he wanted. Furthermore, he would have to give up a lot of equity (the law requires that the business be majority owned by the foreign investor to qualify for the visa) and he did not actually know much – or anything – about the would-be foreign investor(s). Lots of red flags there.
So, we stopped these deals from happening. However, we would still consider these profitable situations for our clients. Why? We saved our clients from getting into risky situations and we saved them from wasting TIME on dead ends so that they could pursue other, more lucrative opportunities.
Should you NOT get into international business ventures? Are we trying to SCARE you?
NO! Of course not. Our reach as business owners is getting more and more expansive and it is good to take advantage of partnerships whether down the street or across the globe. However, you should know who you are getting into business with and you should both be clear about what you want and expect…from the beginning. An attorney can help you to put together communications that clearly express your desires and goals and can help you do your homework on potential business partners so you don’t have to worry about it.