A recent US district court decision in a lawsuit brought by Facebook and Instagram carries important lessons for counsel in the drafting and negotiation of survival clauses—clauses that purport to extend the operative effect of contractual obligations beyond the termination or expiration of the relationship.

When your client is not getting paid for no good reason, there are certain clauses that your client’s contract should have to maximize payment enforceability and leverage.

Many times in contract drafting and negotiation, one party is allowed to act only with the consent of the other party, “not to be unreasonably withheld.” Example: “[Party A] may not assign this Agreement without the consent of [Party B], such consent not to be unreasonably withheld.”

So what happens if Party B unreasonably withholds consent? Does the refusal then automagically become consent, such that Party A is free to assign away?

Avoid designating New York (or Connecticut or Vermont) law or courts in your confidentiality agreements. Redressing the unauthorized use, reproduction or distribution of information, data, or works is now exclusively a matter of copyright, under the law of the Second Circuit US Court of Appeals. Contract law ceases to matter if the subject matter of the contract is content, and only copyrightable content will receive protection.

Nearly all NDAs and confidentiality provisions exclude from the confidentiality and restricted use obligations information that is or becomes “public,” “publicly available,” or “publicly known.”

Contract drafting guru Ken Adams has given his imprimatur to the “is or becomes public” formulation.

But is the “public” characterization the appropriate standard when it comes to the protection of trade secrets?

Let’s say that you’re the deal lawyer representing a California company in contract negotiations with a New York company.  Your client insists on designating California law as the operative body of law that governs the agreement and any related disputes, and on mandating that all disputes be resolved in a California state or federal court.

You negotiate hard for your client’s objective, but the other side is equally determined to designate New York law and New York courts. Your client lacks bargaining leverage to force the issue. Eventually, the other side carries the day on this battle, and your client is forced to accept the designation of New York law and courts in the contract.

In representing tech suppliers, service providers and developers, we often come across "time is of the essence" clauses in customer contracts that purport to apply to some or all obligations of the agreement. An example is, "Time is of the essence with respect to Developer’s compliance with all deliverable milestones." It's tempting to ignore such clauses, in favor of "picking your battles" and focusing on clauses of more obvious import like...

Specific performance of the source code disclosure obligation is the holy grail of the FOSS movement. Recent litigation in California presents a plausible path towards securing such a powerful tool.

That’s the sound of distant thunder.

Described as the “fourth Apollo crewmember,” and credited with saving thousands of lives by improving common medical procedures like IV insertion, a checklist aims to solve one of two operational vulnerabilities humans have in tackling any decision, problem, or task: ignorance–lack of information, and ineptitude–failure to apply known information correctly or consistently. It’s not that we don’t know; it’s that we seem to lack the attention and focus to invest in marshalling what we do know, in a readily accessible form.

A simple checklist is a powerful legal knowledge management tool, and ideally suited for assisting counsel in drafting or negotiating standard categories of agreements.

Consider the following not uncommon scenario: in the payments section of the contract you are negotiating, overdue interest is charged at five percent.  A higher rate is better for your client, and the client wants ten percent, so you redline accordingly. Client ultimately concedes and is willing to accept five. However, the draft from opposing counsel contains the following text:

Overdue interest is chargeable at the rate of five percent (10%).

Knowledge has to be improved, challenged, and increased constantly, or it vanishes.

Peter Drucker (1909-2005)

Professional services vendors that develop custom software or technology to the specifications of their customers often face demands to indemnify and defend their customers from infringement claims of any and all intellectual property rights. “If I’m sued because of your deliverable,” the argument goes, “then you should step up and take responsibility for your failure to respect third party IP rights.”

This stance, though common, fails to appreciate the unique danger posed by “strict liability” IP rights for such vendors.

Professor Tanya J. Monestier, in a thought-provoking piece entitled, Damages for Breach of a Forum Selection Clause, 59 Am. Bus. J. (forthcoming 2021), quite ably goes through the incentives for those inclined to breach mandatory forum selection clauses, and how little some courts do to redress the harm caused by such breach.

Consider the following scenario. Your startup client, a developer of a popular app recommendation engine, is running low on cash, and further investment is not in the cards. The shareholders decide it’s time to sell.

Excitement builds as a massive personal technology lifestyle company takes an interest. After completion of due diligence, however, enthusiasm wanes. Soon the discussion focuses on a potential “acqui-hire,” meaning, a purchase of the company, not to exploit the company’s technology or market share, but simply to hire away the top engineering talent—with a commensurately lower valuation.

The shareholders politely decline BigCo’s offer. And then disaster ensues.

Redline has emerged from beta and is now live, with private guilds, an enhanced member experience, and more. Watch the trailer Lawyers with Mojo or click here to learn more.

Among the nearly infinite variety of legal agreements in use today, the non-disclosure agreement for general bilateral business discussions is by far the most ubiquitous. If measured only by the frequency of its use and the significance of its impact, a company’s NDA template is arguably its most important. The $200 million dollar verdict against Oculus for breach of a rather simple NDA speaks volumes as to how critical such an agreement can be.

In Bullshit Jobs: A Theory, David Graebe, anthropologist and an early founder of the Occupy Wall Street movement, recounts the rise in the last century of “bullshit jobs”: occupations that serve no socially useful function, and instead cause soul-crushing psychological suffering to those forced to take on such work. Graebe contends that as much as forty percent of all jobs in the world are bullshit, which he defines as:

a form of paid employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though, as part of the conditions of employment, the employee feels obliged to pretend that this is not the case.

Graeber catalogs five different species of bullshit jobs: flunkies, goons, duct tapers, box tickers, and taskmasters. He indicts all “corporate lawyers” as falling into the “goons” category.

In high stakes transactions in which vast sums of wealth are exchanged in return for ownership in ongoing complex businesses, mergers and acquisitions (M&A) contracts are an oft-overlooked source of clever legal craftsmanship. With so much value and risk embodied in these transactions, counsel for both parties—sought after specialists in these pressure-filled transactions—play a tense game of textual jab and parry, each trying to minimize risk and maximize leverage for their clients. In doing so, they often create compelling contract language readily amenable for use in non-M&A contexts.

The basic assumption of our daily work as lawyers is that generally, people will follow the terms of an agreement, and that compliance is the default mode of operation. A widespread normative aversion to intentionally breaking contracts is a fundamental societal assumption. This assumption informs our work as lawyers in negotiating and drafting agreements.What if this was not a valid assumption? What if we lived in a world where contract compliance was a simple matter of dollars and cents?

The obligation to return or destroy confidential information upon request (or at contract termination) is ubiquitous in confidentiality agreements. But in this era of distributed network computing and cloud storage, when nothing can ever be completely deleted everywhere, compliance with such a clause is illusory. In complex, long-term contractual relationships, confidential information (usually defined quite broadly, and including “copies,...

In late April, Disney, owner of the Star Wars franchise, announced via Twitter that we should all celebrate May 4th as “Star Wars Day” by tweeting our favorite Star Wars memories using #maythe4th — with tweets powered by Disney Legal (emphasis added):

Celebrate the Saga! Reply with your favorite #StarWars memory and you may see it somewhere special on #MayThe4th.

By sharing your message with us using #MayThe4th, you agree to our use of the message and your account name in all media and our terms of use here: http://disneytermsofuse.com.

Businesses licensing inbound technology or IP usually spend legal effort on ensuring that the licensor can’t assign the operative license agreement to a third party without the licensee’s consent. Often overlooked, however, is the risk of a licensor transferring the actual IP that is the subject of the license in question. The licensee’s hard-fought clause victories, like indemnities, might be for naught if the subject IP is sold. Datatreasury v. Wells Fargo (Fed. Cir. 2008) (“procedural” license terms–like an arbitration clause–do not “run” with the patent and so are not binding on subsequent owners).

It’s good to be reminded of how fortunate we are to be practicing law in a society that upholds the rule of law, at least as a general matter nowadays.

From Alex Batesmith and Jake Stevens comes a compelling piece of scholarship, In the Absence of the Rule of Law: Everyday Lawyering, Dignity and Resistance in Myanmar’s ‘Disciplined Democracy’, Social & Legal Studies (2018):

In binding arbitration clauses, exceptions to the duty to arbitrate for injunctive relief claims are common, especially in confidentiality and technology license agreements. The intention is to ensure that the parties are free to pursue claims for emergency relief notwithstanding that all other claims must be resolved via arbitration.

All too many arbitration clauses, however, fail to articulate the injunctive relief bypass in a way that would allow the parties to actually bypass arbitration and proceed directly to court, given that rules of arbitration universally vest the arbitrator with the power to determine the scope of arbitrability.

In confidentiality agreements, clauses that time-bound the confidentiality obligation are not uncommon. “The obligations of confidentiality under this agreement expire five years after termination”, eg, is a typical formulation. Oft-cited justifications for this include administrative convenience, finality of obligations, and that most information is expected to “go stale” after a while.

The problem, however, is that a trade secret derives its protection from proof that the owner has exercised reasonable efforts to safeguard its secrecy. Routinely signing time-bound NDAs that allow the trade secrets recipient to freely use and disclose such trade secrets after the passage of time can be fatal to their protectability.

A federal district court decision in Massachusetts (summarized ably here) is a grim reminder to all of us that even the most trivial article in the English language can make or break your client’s contract or case.

Because relevant copyright law permits reverse engineering (RE) as fair use in some situations, blanket contractual prohibitions on software RE might not be enforced, esp. if done to secure software interoperability. Most tech lawyers recognize this, and so the following formulation is common: “Licensee will not reverse-engineer … , except to the extent enforcement of the foregoing is prohibited by applicable law.” The problem, however, is that such a clause operates in a purely binary fashion: if RE is fair use, the clause will not be enforced; otherwise, it will. It’s not much of an improvement over a simple prohibition. A better variant would anticipate fair use.

Like many other jurisdictions in the US and abroad, all employers in California, regardless of size or industry, are required to have an illness and injury prevention program (IIPP). This requirement is often overlooked but frequently enforced.

In the words of one practitioner, “Cal/OSHA issues more citations under the IIPP standard than any other standard—thousands each year—many of them for a complete failure to have an IIPP. During a Cal/OSHA inspection, one of the first documents asked for is the IIPP, and failure to have one can carry a penalty up to $25,000.”

Consider the following all-too-common scenario: employee leaks valuable company information to a competitor and is fired. Company then sues the employee for breach of an employment NDA, which applies to “all proprietary information” that the employee received. The confidentiality obligation is evergreen.

Outcome? In a state where employer-mandated non-compete covenants are enforceable if reasonable, a US court earlier this year struck down this exact NDA as an unreasonable restraint of trade.

Knocking down a false, weak or misleading characterization of your opponent’s argument is to engage in strawmanning. This kind of argumentation fallacy requires that the audience be ignorant or uninformed of the original argument to be successful. The opposite of strawmanning is steelmanning):

The Court of Appeals for the Federal Circuit’s long-awaited ruling in the appeal of the Oracle v. Google fair use jury verdict has arrived. Oracle America Inc. v. Google LLC (Fed. Cir. 2018) (“Oracle II”). The court’s second opinion in this legal clash of tech titans is the latest culmination of nine years of furiously fought litigation. Once again, Google lost this round; the Federal Circuit tossed out the jury’s verdict in favor of Google on its fair use defense to Oracle’s copyright infringement claim relating to Java application programming interfaces (APIs).

In 1995, Sun Microsystems released the Java platform and programming language. The Java language, released for free use by all, is one of the most popular programming languages in the world today, taught in university computer science departments worldwide. Developers have published thousands of Java applications for servers, personal computers, and smartphones.

We’re paid to be prophets.

When we study law we are not studying a mystery but a well-known profession. … The reason why it is a profession, why people will pay lawyers …, is that in societies like ours the command of the public force is entrusted to the judges …, and the whole power of the state will be put forth, if necessary, to carry out their judgments and decrees. People want to know under what circumstances and how far they will run the risk of coming against what is so much stronger than themselves, and hence it becomes a business to find out when this danger is to be feared. The object of our study, then, is prediction, the prediction of the incidence of the public force through the instrumentality of the courts.

In the US, a lawyer may not converse with or even contact a person that the lawyer knows is represented (or whose employer is represented) by counsel regarding the subject matter of the representation—unless such counsel consents. In the transactional context, compliance with the rule can be, at best, socially awkward and, at worst, an ethical trap for the unwary.

Consider the following questions (addressed in a recent Redline collaboration about this topic):

As deal lawyers, it’s our job to anticipate disputes. If a dispute does arise, the competence of both sides’ lawyers is immediately put to the test-in the form of a glaring spotlight on the choice of law clause. Is the dispute captured cleanly, or ambiguously? Being forced to spend legal fees on the peripheral question of applicable law is a recipe for massive client frustration.

In a study published in the Journal of Corporation Law, law school Professors Badawi and Webber examined, over a five-year period, takeover target share price changes in reaction to the perceived quality of the law firm(s) filing litigation challenging, on behalf of institutional shareholders, the fairness of the announced proposed merger or acquisition. The professors grouped the plaintiff firms into “high quality” and “low quality”, based on a number of critieria, including value of settlements recovered and whether any of the firms were openly criticized by the Delaware Chancery judges as being, well, worthless leeches, basically.

In the early 20th century, the limited liability afforded by the corporate form was in its nascency. Lawyers consequently resorted to contract language to shield shareholders from liability for the corporation’s debts, using the so-called “no recourse against others” clause.

Today, most lawyers take corporate liability protection for granted, and probably assume that such a clause is unnecessary. Yet, trust in the supposed impenetrability of the corporate veil could be misplaced.