Internet & Technology Law Blog

Liability to Employers

by Jeffrey A. Cohen, Cohen & Richardson

Blackberrys, iPhones, Palms, Droids… the list goes on. Smartphones  are becoming a staple in everyday life and in many industries it is virtually expected by your customers that your employees will be able to access their email during the day regardless of whether they are in their office or not. Furthermore, it is often assumed that workers will have access to their email after hours, on weekends, on holidays and even when they are on vacation.

In the world of employment law there was a time when the claims De Jure typically involved issues surrounding work breaks, lunch breaks, travel time and expenses. Increasingly, however, plaintiff’s lawyers are looking at PDA usage as fodder for their latest claims strategy. We see this issue as particularly important for Internet and technology companies to pay special attention to because the level of employee connectivity tends to rank well above other industries.

The issue involves non-exempt, hourly employees and whether you have established a company policy that requires your employees to check their emails and/or respond to them in their off hours. Such a policy could open your company up to liability for this new brand of employment claim. One solution is not issuing PDAs to hourly employees at all. Another might be altering your employment manual to make it clear that checking and/or responding to emails after hours is purely voluntary and is not required by the company.

Regardless, we expect to see new litigation claims presented on this issue and eventually new legislation to deal with the issue.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

InternetLitigators is proud to announce the selection of Jeffrey A. Cohen as a speaker at HostingCon 2010. Mr. Cohen will be featured in a panel entitled “3 Easy Strategies to Minimize Litigation in the Cloud”. This seminar will discuss the legal risks to your web hosting company from a cloud strategy whether you are offering cloud based services or providing third party cloud services to your customers.

Registration is not a necessary jurisdictional prerequisite for a copyright infringement action. Merely the filing of a complete application will suffice. Cosmetic Ideas, Inc. v. IAC/InteractiveCorp No. 08-56079

By Jeffrey A. Cohen
and Vanessa Pfaff
April 7, 2010

The U.S. Court of Appeals threw out the Federal Communications Commission’s 2008 cease and desist order against Comcast on Tuesday, thereby ruling that the FCC does not have the legal authority to enforce Net neutrality regulations on Internet providers.

In August 2008, as a part of their effort to regulate providers and promote Net neutrality, the FCC issued a cease and desist order to stop broadband provider Comcast from favoring certain sites and services over others. Specifically, the FCC order was aimed at Comcast’s 2007 interference with BitTorrent, an online file-sharing service. Comcast had attempted to control BitTorrent’s access to bandwidth, claiming that BitTorrent’s subscribers were using too much bandwidth and subsequently were slowing Internet traffic. The FCC stepped in to prevent Comcast from interfering with the FCC’s Net neutrality policies, doing so by issuing an order forbidding Comcast from blocking these subscribers’ use of bandwidth.

Comcast complied with the order, but then responded by suing the FCC, arguing that the FCC’s order was illegal and that the FCC lacked the authority to enforce such an order in the broadband sector, which had been deregulated by law under President George W. Bush. The FCC maintained, however, that it had the authority under existing law to set certain rules for information services, such as broadband, and that these rules could include Net neutrality rules.

On Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the FCC had no such authority to enforce this policy, rejecting the FCC’S reasoning and making future litigation in this area likely.

This ruling has placed a roadblock in front of the FCC’s pending initiative to draft formal Net neutrality rules, which it announced last October. According to the FCC, whose policies are committed to promoting open and affordable broadband to all of the U.S., such rules are necessary to prevent phone and cable companies from restricting online access to users.
The Court stated that the FCC’s regulatory behavior was not backed by Congressional law and that the FCC did not have the power to regulate the neutrality of Internet providers. Judge David Tatel’s Opinion on Petition for Review of an Order of the FCC of April 6, 2010, states that the FCC does not have “authority to regulate an Internet service provider’s network management practices” unless “it demonstrates that its action…is reasonably ancillary to the…effective performance of its statutorily mandated responsibilities.” In this case, the Court has ruled that the FCC’s cease and desist order is does not meet such qualification and is outside the FCC’s legal authority.

This ruling also has an effect on some of the other plans that the FCC has, such as its National Broadband Plan, which it announced last month. This plan, headed by FCC Chairman Julius Genachowski, is intended to make high-speed Internet widely accessible and affordable across the U.S. Actions through which the FCC assumes some level of regulatory power now appear to be under the threat of litigation.

Although this decision has implications on the FCC’s ability to control and enforce Net neutrality, the Opinion issued by Judge Tatel did not contain any assessment of the importance of Net neutrality as a policy. Neither did the Opinion express any judgment or acquittal of Comcast’s interference with broadband use. The ruling was specific to this case, but still set a precedent for future FCC regulation disputes. The Court has found Net neutrality, in this instance, to be unenforceable, at least by the FCC.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies. Miss Pfaff is a Law Clerk for the firm. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

Our Founder Jeffrey A.  Cohen was interviewed by WHIR TV on the subject of the establishment of InternetLitigators, Cohen & Richardson, LLP and current events in Internet Law.

2/2/10 Case Report – Arbitration clause found unconscionable where customers were provided no opportunity to negotiate terms and effect of clause was overly harsh. Effect upon click through agreements uncertain. Lhotka v. Geographic Expeditions, Inc.

InternetLitigators represents clients in cities all of over the United States and many other countries. This includes clients in the City of Los Angeles. As of 2001, out of the 20 largest US Cities only three imposed a Gross Receipts Tax upon their businesses. See Chart. Of those Gross Receipts Taxes, the City of Los Angeles was by far the highest. The City of Los Angeles’s tax rate is variable depending upon the type of business conducted. In 2009 the City of Los Angeles Gross Receipts Tax ranged from a low of $1.01 to a high of $5.07 for each $1,000.00 of Gross Receipts earned within the City. By way of illustration, on Gross Revenue of $20 million that is a range from $20,200/yr to $101,400/yr depending upon the classification that you are placed in.

Another factor that can greatly effect your overall tax liability is the allocation of gross revenue between operations that you may have within the City and outside the City. With regard to web hosting, the city may argue that it is the location of your web hosting servers that is determinative and not your sales, customer service or web design services. This is an unpleasant reality currently facing Los Angeles Data Centers. Specifically, the City of Los Angeles has become aggressive not only in increasing its audit percentages but in attempting to reclassify businesses previously accepted as falling within reduced tax classifications. In addition, the City of Los Angeles has become aggressive in expanding the definition of revenue that is earned within the City. For businesses in the City of Los Angeles this can be a shocking combination. There are numerous reports of companies simply leaving the city rather than deal with these reclassifications thereby resulting in what appears to be a net loss to the City as the result of their efforts.

The InternetLitigators team of attorneys recently prevailed against the City in an administrative hearing against just such a claim. Our litigation team successfully argued that web hosting, when combined with the standard web development services provided by most if not all web hosting companies does fall within the definition of a “multimedia business” according to the City of Los Angeles guidelines and historical notes for that exception despite the City’s assertion to the contrary. If the City complies with the ruling of the hearing officer we will successfully have avoided the trouble and expense of litigation against the City for our client.

Bottom Line: In the event of an audit, we recommend that you closely evaluate the purported gross revenue which serves as the basis for any assessment and the methodology used for reaching those figures. We recommend that you evaluate your “out of city” operations and perform your own allocation between “in city” and “out of city”  revenue sources. Finally, we recommend that you closely evaluate your possible entitlement to classification within any of the reduced tax classification categories.  Seek the assistance of a CPA and legal counsel familiar with the city’s administrative procedures and classification guidelines.

The 2009 City of Los Angeles Tax Classification Table can be found here.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies.  The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

It sounds obvious. However, as the economic downturn begins to show signs of a turn around, the frequency of Internet transactions are on the rise. The downturn has created some change in the market. Companies have become more efficient than ever. The market downturn has also restructured the workforce significantly and has, in some instances unwillingly, created thousands of new Internet entrepreneurs either seeking to supplement their income effected by lower raises or bonuses or in many instances replacing jobs that were eliminated as the result of layoffs and restructures.

Increased Complexity in Transactions

The world of Internet content development, marketing, traffic and lead generation is entering its adolescence and as a result deals in these areas are becoming more and more mature and complex. As a result of these changes, our office is seeing a larger than ever increase in the number of unrepresented companies on the opposite side of deals and transactions. This means that these unrepresented parties are being placed at a greater and greater disadvantage.

Read Every Word

We are constantly surprised at how many, thus far, very successful business owners are so willing to simply sign an agreement seemingly without spending the time to have it reviewed by an attorney with their best interests in mind or even apparently reading it themselves. Our advice this month hopefully serves as a reminder more than any earth-shaking new advice. That is that in any business transaction that you enter into, read what you sign carefully before you sign it and ask questions about anything that is not perfectly clear. Where possible, form a relationship with a qualified attorney familiar with the Internet and with your company so that you have efficient and immediate access to someone that can answer your questions and suggest alternatives on a moment’s notice.

Raise only Appropriate Issues

Just as dangerous to themselves is the unrepresented party that makes a far bigger deal out of a term in an agreement than is necessary. Almost as if these individuals feel that they cannot sign a document without making some sort of fuss to make them feel as though they have accomplished something, they argue a point that needs no arguing and wind up signing a document that includes a difference with no distinction from the original. Having business counsel can avoid this situation and the extra expense and delay that arises by wasting everyone’s time – not to mention the actual loss of reputation that is created for these individuals when everyone else realizes what has occurred. The party develops a reputation for being difficult and the changes he or she proposes in the future begin to lack credibility.

At a minimum, read what you are signing and ask questions about the terms that you do not understand. By this we mean read it – not skim it to see if anything jumps out – we mean actually take the time to sit down and read every word. There have been very few agreements that we have ever approved without any change or correction.

Copyright (c) 2009 – InternetLitigators – All Rights Reserved.

Jeffrey A. Cohen is a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

New Case – Interactive Nevada website even when combined with Illinois targeted advertising is insufficient to confer jurisdiction upon website owner for injuries occurring in Nevada. Linehan v. Golden Nugget USDC Northern District of Illinois 05 C 7030

By Jeffrey A. Cohen 

This month InternetLitigators has been presented with several issues involving website development and design. We represent both web designers and webmasters regularly so our experience and comments on this issue are intended to address both sides of this deal.

Whether you are a Designer or a Webmaster there are a few things that you should always do with regard to your web design agreement.

Put it in Writing

This may seem obvious but we have been presented with many situations where work was done with out any written agreement in place at all or where such an agreement may have existed but was not signed. There are many terms that should be addressed in advance of any work being performed and the written agreement is the best place to do so in order to avoid conflicts and misunderstandings in the future. The process of negotiating the agreement is an excellent way to ensure that the parties each understand what is being promised. Once things go bad, reaching any agreement to terms becomes far more difficult.

Be sure that the agreement is signed by both parties to the agreement. Keep a copy of the agreement for your reference in the event that you should ever need to refer to it during the course of the project or at any time afterwards.

Read it, Understand it, Negotiate it and THEN sign it.

First of all one should understand that it is typical for a designer to provide the form of agreement for web design services. Typically, the designer will have an attorney draft an agreement to specifically address the services that they provide and the terms that they require. As would be expected, when a web designer client hires an attorney to prepare such an agreement, the terms that are included will most likely favor the client, sometimes strongly and sometimes unfairly.

This is particularly true where the agreement is framed as an on-line click through type agreement and as such it is very likely that in most instances it will be looked at with nothing more than a passing glance. An astonishingly high number of agreements we have seen, particularly the ones that appear somewhat informal, are filled with terms that if you as a client read and understood them should send you running.

Therefore, while it may seem to be an obvious point to remind readers to be certain to read any contract before you sign it – it is necessary because it is not uncommon, particularly for smaller projects to have people tell us that they simply didn’t do so and instead relied upon what they were told by the designer. Unfortunately, this is a poor practice for a number of reasons not the least of which is the fact that it is very common for design agreements to contain a standard provision that says (in not so certain terms) that you agree that anything that you have been told in negotiations by the designer is irrelevant to your agreement and that you agree that you are not relying upon any of the statements made to you by the designer and that the written agreement terms are all that matters.

By way of illustration, we recently were provided with an agreement filled with unfair (and in one instance unlawful) provisions. We made numerous significant changes to the agreement for our webmaster client making the agreement fair and forcing the designer to take responsibility for his work and certain problems that could be created by the designer with his work on this particular project. We had essentially created an entirely new agreement that ran in favor of our client. The client provided the agreement back to the designer and we honestly expected the designer to flatly refuse the new terms. To our surprise, the designer signed the agreement including all of our changes – it seemed as though he apparently didn’t bother reading it!

The point is that where there is a term in an agreement that you do not like, do not be afraid to change it. Remember that you are the customer and the designer needs your business. Be certain that you understand the explanation. If the explanation does not make sense do not sign the agreement. If the designer offers an explanation of the term, put it in the agreement or at the very least ask that it be put in another writing.

As a Designer, if a customer makes changes to your standard agreement make sure that you understand the changes and their effect upon the balance of the document before you agree to the changes. It is much better to learn of a basic disagreement in the initial stage before any work is commenced than it is to learn of any disagreement as to contractual terms later.

For Designers or Webmasters, where there is any term that you do not understand hire an Internet attorney to look over the agreement, explain the effect of the term and advise you of any particular concerns.

There are many issues that should be covered in any web design agreement. The issues that should be addressed depend upon the nature of the work to be performed and should be addressed to any specific situation individually. Some important issues to consider for each side of the deal are as follows:

ISSUES FOR DESIGNERS

1 – Payment Terms

Make sure that they are perfectly clear as to what must be paid when and what happens if the payment is not made. Consider requiring payments in stages of completion of the project. Consider conditioning your obligation to provide deliverables upon final payment.

2 – Deliverables

Consider utilizing a development site where you remain in control of the files but your clients can log in and see the progress of your work. Consider the use of php or other server side code to protect any pre-mature copying of your work. Consider imbedding your company name into the files until they are complete.

3 – Client Participation

Make clear what you expect to receive from your client and when. Condition your obligations upon the completion of the client obligations. If your client will be providing copy, your final deliverable dates should be based upon the date that you receive the information that you need. Confirm the date of agreement, receipt of materials and completion in writing.

4 – Copyright

Consider an agreement that any materials provided by the client are provided with all necessary rights to use them. Consider a strong indemnity provision against any third party claim of any lack of such right. Language such as “work for hire” can drastically change the nature of the rights vested in either party. Consult legal counsel in relation to any language that you do not understand.

5 – Arbitration

Consider an arbitration provision that allows any disputes to be handled without the expense and inconvenience of civil litigation.

ISSUES FOR WEBMASTERS

1 – Pay Special Attention to the Payment Terms

Pay special attention to the payment terms. The services provided can be limited, for example, to a number of hours or a number of pages and they can authorize the designer to perform additional work OVER AND ABOVE THE CONTRACT PRICE and bill you for it. Be certain that you understand EXACTLY what the agreement is going to cost you when all is said and done. Any extra work should be subject to your approval only.

2 – Scope of the Assignment

Be certain that your agreement clearly and accurately states what it is that you expect from the designer. Consider specific reference to the number of pages, any special coding (flash etc), any other services that you expect to be included, any promises that have been made by the designer.

3 – Completion Date

Be certain that there is a clearly stated date that you may expect the work to be completed. Watch out for complicated terms that allow the designer to delay the completion indefinitely.

4 – Final Approval

Make sure that before your final payment is due that you have the opportunity to give final approval of the website. Ideally this approval should be given throughout or in stages so that you can remain involved with the project. If the design or any component thereof does not meet your approval PROMPTLY notify the designer of your exact concerns. Be certain that there is no penalty to you or requirement to pay until the site meets your approval and functions the way it is supposed to on your selected web hosting service provider or server.

5 – Copyright Issues

This can be a complicated issue. In general terms, you want to be certain that you own the site that is completed. Rights less than ownership including a license to use the site are limited rights and may not allow you to use the site or all of its components the way that you want and could subject you to additional fees or costs. An unfair license agreement could force you into an ongoing relationship with the designer. Language such as “work for hire” can drastically change the nature of the rights vested in either party. Seek legal advice where you are not absolutely clear as to your specific situation.

About: Mr. Cohen is a Partner in the Law offices of Chapman, Glucksman & Dean apc in Los Angeles, California. He chairs the firm’s Internet & Technology Practice Group and represents Internet companies Nationwide on all business law issues. He is also the director of InternetLitigators. This Blog neither constitutes legal advice nor creates an attorney client privilege with the reader. Do not post comments concerning specific legal situations. Mr. Cohen can be reached at jcohen [@] InternetLitigators.com.

By Jeffrey A. Cohen, Esq.

We receive inquiries quite often from prospective clients wanting form documents to use as Terms of Service to govern the use of their website or inquiring as to whether a set of Terms drafted for one operator site, or worse, simply found on an unrelated website, can be used instead of having terms drafted for the particular site involved. For purposes of this article, Terms of Service include Terms of Service, Terms and Conditions, Privacy Policy, Acceptable Use Policies, Subpoena Policies, UDRP policies, Child User Policy, Copyright Claim Policies, and any other policy or procedure that you have in place for users of your website or the operation of your online business.

While there is no law that requires a website operator to post Terms of Service (other than a Privacy Policy in some instances) your Terms give you the opportunity to set forth the conditions under which you allow the users of your website to purchase your products or services, post content or use and depend upon the information and materials that you provide them. Your Terms are your opportunity to set the expectations of your users in order to avoid, as much as possible, any disagreement about your user’s rights to use your site, your user’s right to depend upon the availability of your site, your user’s need to pay for your site, your user’s right to post content to your site, your right to remove content, and the terms under which you offer any product or service for purchase from your site and the your applicable limitations among many other things.

A website without such terms leaves the agreement between the operator and the user to be gleaned from the nature of the site or kind of transaction which may ultimately be determined to be significantly different than intended by the operator.

In general, posting such terms alone is insufficient. In many instances, securing some evidence of agreement by the user or customer to the Terms is required to successfully enforce them. This is often accomplished by a simple check box next to a statement of agreement to the terms.

Another general rule is that the closer the user is to the actual text of the Terms the greater the likelihood of enforceability. For example, if your user checks a box saying they agree to your Terms of Service but you do not provide a conspicuous, direct link to those terms, any enforcement of the best Terms could be difficult. Where agreement to certain terms is crucial to operations some require not only a link to the terms but they require the user to scroll to the end of the terms before allowing them to indicate their agreement. Other operators require a user to type their “signature” to evidence their agreement to the terms. A signature in that instance can usually be any electronic representation the user intends to bind them to the agreement but typically takes the form of the users name surrounded by slash marks (eg: /User First and Last Name/) This makes it that much more unlikely that a user could argue that they did not understand that they are agreeing to Terms or to exactly which Terms they are agreeing.

For InternetLitigators attorneys, the process of drafting terms of service for any website involves three stages.

1. Interview Preferably in person but often by telephone we spend the time to get to know the personality of the operator and their attitude toward customers, users, privacy, returns, payment, and other issues relevant to the site.

2. Investigation By this we mean a thorough investigation and examination of the bsite including any information collected from users or customers, eCommerce, user content, third party content, graphical content, video content, musical content and all services provided. If there is a membership process we actually register for the site and work through the entire membership script from beginning to end.

3. Drafting The information obtained in the first two stages is brought together into one (or more) documents that reflect the specific business of the website, the philosophy of the operator, and the specifics of the day to day operations of the website and business.

There is a fourth stage, annual review, where the website policies are updated to reflect changes in policies or procedures as well as any applicable changes in the law.Any process that fails to include each of these stages risks inappropriate, incomplete, inaccurate or outdated terms of service and consequences including customer complaints, returns and chargebacks, copyright infringement claims, and even lawsuits and customer complaints, to lawsuits by customers or users and even third party liability.

Some online services offer form agreements for sale and market them as being for use on websites however in our experience each such services are without fail careful to point out that they are not offering legal advice and cannot guarantee the applicability of any form agreement to any particular situation causing one to wonder exactly what value such an agreement provides.

InternetLitigators has written a great many sets of Terms for clients. About half of our assignments in this regard are from clients that already have Terms posted which are either written by the client or adopted from a collection of sources. The other half is from clients that have no posted Terms at all. Either option is perfectly acceptable.

Generally, a set of Terms for a website will take the same amount of time to draft from scratch as it will to prepare from a document created by the client. This is because re-writing is, in general, a slower process. Often, fixing problematic or internally inconstant, inapplicable or ineffective language is more time consuming that simply drafting an agreement from the beginning.

In some instances, the setting and posting of certain terms are required by law. California, for example, requires any website collecting personally identifiable information from California residents to post a privacy policy containing at least the following information:

• An identification of the categories of personally identifiable information that the operator collects from consumers.
• An identification of the categories of third-party persons or entities with which the operator may share that personally identifiable information.
• A description of any process in place for consumers to review and make changes to the information collected.
• A description of the process by which the operator will notify users of any material changes to the policy.
• Identify the effective date of the policy. Conclusion The effect of any policy that you post can have significant consequences. The failure to post a policy can create significant ambiguities with Users and Customers and in some instances can be a violation of law. The thought of buying an “off the shelf” policy or simply posting a policy without some legal review by and Internet Attorney is cause for concern and appears, based upon our experience, to be a strategy that is now seldom adopted for serious business websites.

Mr. Cohen is a Partner in the Law offices of Cohen & Richardson LLP in El Segundo, California. He chairs the firm’s Internet & Technology Practice Group and represents Internet companies Worldwide on all business law issues. He is also the director of InternetLitigators. This Blog neither constitutes legal advice nor creates an attorney client privilege with the reader. Do not post comments concerning specific legal situations. Mr. Cohen can be reached at jcohen [@] InternetLitigators.com.

InternetLitigators has attended the premier web hosting event in the Country for the third year in a row. This year, HostingCon was at the beautiful Navy Pier in Chicago, IL. Sessions on Search Engine Marketing presented by Ben Fisher of TechPad Agency and Neil Patel of ACS offered valuable tidbits of information useful to anyone interested in raising their relevancy on the Internet. Derek Vaughn of TechPad Agency gave a Nostradamus like prediction of the future of the Internet and the place that web hosting will take in that future.

The merging of Media was an obvious theme and several examples were offered. We even got to see an iPhone obliterated in a blender to illustrate the point of thinking creatively in your marketing strategy.

Viewing Web Hosting as a somewhat ubiquitous commodity necessary only to provide the true products and services in demand by consumers was a common thread in many presentations. This was highlighted succinctly by Richard Rosenblatt of Demand Media in his presentation entitled Next Generation Web: What Lies Ahead for Hosting.  What is Web Hosting? asked Rosenblatt rhetorically. Lou Honick of HostMySite prophetically added a footnote to his own comments in the keynote panel discussion reminding the audience that dismissing the entrance of some larger companies into the web hosting market is unwise. Honick suggested that maybe it is the rest of us that should learn something about the products and services that these entities have chosen to offer to the public.

Overall HostingCon 2007 was a valuable opportunity to connect with the Web Hosting industry for educational and business opportunities alike.