Keeping Up With Technology

Austin Business Lawyer | Texas Business Attorney | 

By Brenda Collier


Technology is changing so rapidly that the related laws barely keep pace with the advances in this area. For instance, five years ago your company probably didn’t have an intranet or electronic mail. Now they are likely crucial to your business operations.

At least once a year, review all agreements related to technology, both in-house and with third-party vendors. Be familiar with the terms of technology agreements affecting your company. For instance, do you know what your company’s licensing agreements say about the provision of technical support after the sale?

Technology continues to revolutionize the business world. Regular review of all technology agreements affecting your company will both benefit and protect your busines

 

Guess Who Owns that Great Piece of Software Your Assistant Developed

A hot new topic in the law for emerging growth companies is whether trademarks, copyrights and patents developed by your employees on company time or otherwise, are owned by the company or by the employee. If you don’t have a clear agreement with your employees on this issue, you may be surprised at the possible outcome when a dispute arises about ownership: the employer, the employee or both,  depending on many different factors.

Without a written agreement that spells out ownership of property created by the employee, your company could lose valuable rights in this area. That informal agreement you made with your director of information services about the great software program she wrote, partly on company time, may not determine who owns the right to use or sell the software. Protect your company with a written agreement signed by the employee, to avoid unpleasant surprises.

 

Discrimination and Sexual Harassment

If you have been discriminated against by your employer because of your national origin, age, or race, or you have been sexually harassed, you may have a claim for money damages against the employer under federal or state laws. If you have been retaliated against by your employer because you made a complaint for discrimination or harassment, you may have a separate claim for retaliation.


You should first report the harassment or discrimination to your employer in writing and keep a copy of the report. It should be short and factual in nature, and not elaborate on the complaint. Be prepared to provide names of witnesses if any. And understand that your complaint will not be confidential because employers must investigate the complaint. Know also that the Human Resource division of your employer is NOT on your side, and that they are paid by the employer to keep the employee from filing a lawsuit, so be wary of them and don’t depend on what they say. If the company brings in a lawyer to “interview” you, it is best to have your own attorney present.


Be aware of deadlines for filing a claim. You must file a claim with the Equal Employment Opportunity Commission (EEOC) within 300 days of the action that you are complaining about. In many states, including Texas, there is a sister-agency to the EEOC where you could file the complaint as an alternative to the EEOC. In Texas, however, you have only 180 days within which to file the complaint with the Texas Commission on Human Rights (the TCHR in Austin, Texas) after the action you are complaining about occurred. You must file with either the EEOC or a state sister-agency as a pre-requisite to filing a lawsuit against the employer. You can find the address and telephone number for the EEOC and the TCHR on the Internet.


Sometimes the lawyer for an employee will become involved in the complaint process at the level of the initial problem within the company, and other times the lawyer will wait for the investigation by the government agency to be completed. Completion of the investigation by the government agency can take over a year to complete, or you can request at any time that you be given a “right to sue” and after approximately 6 months of filing the original complaint with the government agency you will obtain the right to sue. You will then have 60-90 days, depending on the government agency, to file a lawsuit. If you have not involved an attorney before obtaining the “right to sue” from the EEOC or the state agency, you should immediately try to find counsel to represent you. That process may be more difficult than you originally imagined, as lawyers for employees are inundated with requests by employees to take on the complaint.


Because lawyers for employees almost universally handle these matters on a “contingent fee” basis, for a portion of the amount of money recovered, each lawyer working for employees can take on only a handful of clients at any given time. As an example, this firm discusses complaints with thousands of employees each year, yet undertakes less than 30 new clients per year. If you think you have a complaint that should be reviewed, you can send a brief email about it to the Firm, however do not assume that it will be responded to, as the Firm receives hundreds of such requests for representation every month, and responds to as many as it can. You can also contact the National Employment Lawyers Association, at nela.org for a list of employment attorneys in your area.

 

 

Non-Competition and Non-Disclosure Agreements: Are They Enforceable?

Many employment contracts contain non-competition or non-disclosure agreements, or both. Covenants not-to-compete are the most difficult for the employer to enforce if the provisions are not written properly. The Texas courts and the Texas legislature disagree about the enforceability of non-competition agreements. The Supreme Court of Texas has held that for a non-competition agreement to be enforceable, the employer must have some type of agreement with the employee that gives the employee something of value -- most often trade secrets, confidential information or other proprietary information -- which the employee promises not to disclose.

A properly written and generally enforceable non-competition agreement will also contain language that:

limits the geographical area to which the agreement applies.
limits the duration of time the agreement will be in effect.
details the scope of the prohibited activity.

Courts will generally decline to enforce any non-competition agreement that seems to overly restrain someone from earning a reasonable living. In contrast, a non-disclosure agreement does not restrain a former employee from earning a living, it merely restricts a former employee from competing with the former employer by using secret, confidential or proprietary information the employee obtained while working for the former employer.

For a non-disclosure agreement to be enforced, the information obtained by the former employee must be truly confidential and not just general knowledge or experience acquired by the employee during the term of employment. To determine if the information obtained by the employee falls under the secret, confidential or proprietary banner, courts may look at the following:

  • whether the access to the information is physically restricted.
  • whether employees who have access to the information are required to sign confidentiality agreements and are educated by the employer as to the need to protect such information.
  • whether outside suppliers, vendors, contractors, distributors, sales reps, etc. who have access to the information are required to sign confidentiality agreements.
  • whether chemical formulations, computer data and similar information is restricted in access or the identity of the information is disguised.


When drafting both types of agreements, it’s important not to use overly broad language and to be as specific as possible when detailing the types of conduct you wish to specifically prohibit.

 

Protecting Your Business: Understanding Co-Ownership of a Business

Regardless of how your business is organized -- as a corporation, a partnership or an informal business venture between family and friends -- jointly owning and managing a business is a lot like being married. Who does what in the company, and when? Who gets what from the enterprise, at what time? All co-owners of the company must make decisions jointly through cooperation and compromise.

Do you know what could happen when co-owners disagree and are unable to compromise on important issues, such as whether to employ all owners and how much to pay an owner/employee? It’s best to have a written agreement that sets out what happens if a co-owner dies, divorces or just wants to retire from the business. When co-owners fail to put in place clear, written agreements that govern these types of issues, expensive and time-consuming litigation can bring a thriving business to a halt while disputes are resolved in a court process.

If you have such a written agreement for your co-owned business, revisit the document periodically with your co-owners to determine if it reflects your current desires for governing the business. It’s much easier to determine or revise the terms of such an agreement before a crisis arises than to negotiate the terms later in a courthouse and an atmosphere of bad feelings.

 

Buying or Selling A Business: Tips for Success

Buying or selling an operating business can be profitable. Here are some basic tips to consider whether you’re a buyer or a seller.

  • Look at the governing documents for the business being bought or sold. Is it a sole proprietorship, a corporation, a partnership or some other entity? Make sure all documents that establish and control the business entity are current and provide the necessary authority to conduct the business operations.
  • Review all contracts used in the business, such as loan paperwork, leases, and vendor and client contracts. Do the terms of these contracts meet your expectations of the company’s level of clientele and business expenses? Are there any oral agreements in addition to the written ones?
  • Examine all financial records in their original form. Have an accounting professional review the records if necessary. Ask whether the bank statements match the reported income and expenses of the business. Look at a representative sample of checks and deposit slips to determine whether the income and expenses of the business are accurately stated.
  • Determine the sale device -- is the stock or merely the assets of the company being transferred? Make sure the sale documents reflect the business deal and contain the representations and warranties of both parties.
  • Negotiate the “deal points” of the transaction. These points are “what, when and where” questions that make up the business deal itself.
  • Ask your lawyer to step into the process any time you need assistance, whether during the initial review of the transaction (called “due diligence”) or at any other time up to the drafting of the sale documents and the closing of the sale. The more complex the deal becomes, and the more valuable the transaction, the more likely you’ll want to involve your attorney.
 

Hiring and Firing Without Fear

Hiring

Most companies are bombarded with information about employment law. Newspaper headlines inform us of the most outrageous hiring practices and the resulting jury verdicts. The reality is that most companies’ hiring practices fall somewhere in the middle ground between perfect and discriminatory. Knowing and following the basic rules for hiring could help keep many businesses out of court.

  • DON’T ask the obvious. Merely asking questions about age, sex and race is not illegal. However, it is illegal to USE this information for a discriminatory reason. And since the presumption is that all information gathered is used, it’s best not to ask those questions at all.
  • DON’T write on the original job application. Make copies of the application and write comments on the copies. If an interviewer’s comments are inappropriate, a supervisor may decide not to use them and destroy the copy.
  • DON’T ask questions unrelated to the job. If the interview question doesn’t relate to the job duties, don’t ask it. When a job requires travel and overtime, it is perfectly acceptable to ask the applicant if there are any barriers to performing those job requirements. It is not acceptable to ask:
    •       1. whether the applicant’s spouse minds if he or she travels, or
    •       2. whether the applicant has small children.


Also remember that small talk in an interview should not stray into protected areas that develop presumptively discriminatory information -- such as whether the applicant has been denied medical or life insurance coverage or intends to have children in the near future.

DO make sure all company policies and procedures are legal. In addition, policies and procedures should protect at-will status of employees who are not subject to employment contracts. Make sure the company is in compliance with the myriad of federal and state laws in this area.

Firing

Terminating an employee is a difficult task for most people. It can also be fraught with anxiety about the threat of legal action. Here are some basic rules of thumb to follow when firing an employee.

  • Do your homework before you terminate.
    • Review the company’s policies and procedures about employee termination to determine if they’ve been followed. If not, consider retaining the employee until the appropriate procedures have been followed. A common problem for employers is failing to have properly written policies in place to provide notice to employees of expected behavior and disciplinary procedures that could lead to termination.
  • Conduct an exit interview.
    • Give the employee his or her final paycheck at the exit interview. Always have at least one company representative present. Ask the employee for feedback about the company, including why things did not work out. You may obtain valuable information and uncover problems within the company that haven’t surfaced yet.
  • Terminate quietly.
    • The decision to terminate an employee should never be made hastily, and the termination should take place as inconspicuously and privately as possible. This allows the fired employee to retain some dignity. Many lawsuits are filed due to hard feelings over harsh treatment during the termination process.
  • Get a release.
    • If you offer anything of value other than accrued wages and benefits to the employee (e.g., severance pay or release from a non-competition agreement), offer it on the condition that the employee executes a release of liability to the company. While a release is not a sure way out of all lawsuits filed by disgruntled employees, properly drafted and executed releases are being upheld in many courts.


Attention to these simple rules may avoid a costly battle with a terminated employee. Good common sense and common courtesy are at the heart of most employment laws and disputes. The courts are clogged with employment lawsuits and disputes that could have been avoided through proper use of procedure and kindness. Even if the company wins a legal dispute, the cost of the legal defense can be crippling. This is an area of law where an ounce of prevention is certainly better than a pound of cure.

 

Contracts: Get It In Writing!

Sealed with a handshake? American business was founded on the oral promise to guarantee performance of a particular act. Today, however, many agreements must be put in writing to be enforceable. A written document also ensures that all parties understand the essential terms of the agreement. In some cases, a written document is absolutely necessary to enforce a contract.

A law called the Statute of Frauds governs when an agreement must be in writing. This law was written to prevent fraud and perjury by requiring special written evidence as a condition to enforcement of the contract. Business contracts that must be in writing are:

  • promises to pay the debt of another.
  • the sale of land.
  • contracts that cannot be performed within one year.
  • the sale of goods for $500 or more.


In all other situations where an agreement is made, the Statute of Frauds does not apply. As long as there is mutual agreement and promises made, and the contract is not illegal, an oral contract is legally enforceable. Even if only an oral contract exists when the Statute of Frauds requires a written document, the contract is not void, merely unenforceable. This means if a contract that should have been in writing is completed, i.e. all terms of the contract have been performed, the contract will not be undone for lack of a written document.

For example, an oral contract to sell a painting for $750 is effective to transfer ownership of the painting even though no written contract exists. However, if one of the parties does not perform their part of the agreement, the contract will be unenforceable because of the failure to comply with the Statute of Frauds. Contracts need not be complicated to be enforceable. Even a memorandum signed by the person against whom the contract is being enforced that sets out certain essential terms of the agreement is sufficient.

The written agreement must include:

  • the identity of the contracting parties.
  • a description of the subject matter of the contract.
  • the terms and conditions of the agreement.
  • a recital of the payment.
  • a signature of the party against whom the contract is to be enforced.
 

How To Control Your Legal Fees

As with most service businesses, fees for legal services are determined by three criteria: the amount of time spent, the knowledge of the attorney and the experience required to perform the service. A savvy client can control the cost of legal representation by following these simple steps:

Negotiate major business points
By negotiating price, payment terms and other purely business points, and keeping the lawyer in the background, you can keep legal fees down. However, keep your attorney advised of the progress of negotiations so he or she is informed about the terms of the deal and better able to advise you on the ramifications of the points requested by the other side. After you’ve confirmed the primary terms, your lawyer will be able to negotiate the legal aspects of the contract and draft the final documents reflecting the business deal.

Obtain and organize relevant documents before turning the project over to your lawyer.
Often a client will leave the identification and organization of relevant documents until the last minute. This is inefficient and causes the attorney to work in a “crunch,” which can increase legal costs. Having the relevant documents organized and available when you meet with your attorney will reduce the bottom line on your legal bill.

Don’t hesitate to show your attorney form contracts
If you have a form or document you’d like to use for your business, it may be adequate with few revisions. If the document is not copyright protected, your attorney should be able to adapt it to your business needs with minor changes. On the other hand, if the transaction is complicated or unique, it’s more cost-effective to let your lawyer put her experience to work drafting the document from “scratch.”

Keep your lawyer informed about your business
The more your lawyer knows about your general business activities, the less time she or he will need to become knowledgeable on any one particular issue when a specific legal need arises. Also, your lawyer can better advise you about the ramifications of any particular action if she or he understands the context of the event.

Investigate important events quickly
If an event occurs that you think may later develop into a claim for or against your company, investigate it immediately. You may want to call your lawyer to discuss the best way to conduct the investigation. Then talk to the people involved. Write a letter to your lawyer summarizing the events you believe may have caused the problem. Have any witnesses write a letter to your lawyer describing what they know. The more you do at the outset, the less your lawyer will have to do later to substantiate the event. Also, in any dispute, a contemporaneous recording of the event is more credible than one recorded at a later time. In other words, that memorandum or e-mail written during the crisis is much more believable than the one you prepared for your attorney after the fact.

 

Protect Your Information: A Copyright Primer for Authors of Computer Software

How can you use the protection afforded by federal laws to secure the software you make available to the general public? The best type of legal protection for you and your software depends on the type of program and the form of the computer code. Some common ways to legally protect your software include copyrights, patents and trade secret techniques. Most original computer software expressions qualify for copyright protection.

Copyright is a form of protection provided by Title 17 of the United States Code to authors of “original works of authorship” including literary, dramatic, musical and artistic works, as well as other intellectual works like computer software. Copyright protection is extended to both published and unpublished works.

Federal copyright law lists the following criteria to determine whether a work is protectable under the Copyright Act:

  • The work must be an original work of authorship.
  • It must be fixed in a tangible medium of expression (although the fixed form need not be directly perceptible, as long as it may be communicated with the help of a machine or device).
  • It must not extend to protection of any idea, procedure, process, system, method of operation, concept, principle or discovery.


Some United States Federal Courts have recently decided that software which satisfies the three-pronged test above and can therefore be copyrighted includes:

  • operating systems
  • object code
  • source code
  • microcode
  • ROM operating systems
  • computer game screens
  • electronic data bases
  • application screen displays
  • user interface displays
  • computer generated art depictions
  • the “look” and the “feel” (i.e., the sequence and organization) of a software program