Many companies in the technology industry pay workers as “independent contractors” or “1099 workers,” write Mark J. Neuberger and Larry S. Perlman of Foley & Lardner in an article posted by The National Law Review. In theory, classifying individuals as independent contractors rather than employees can bestow significant economic benefits on a company. This option may be very attractive to a start-up who may be short on cash to pay salaries and fringe benefits.

“When independent contractors do the work, your company is not responsible for tax withholdings, is not responsible for workers’ compensation or unemployment insurance, and does not need to pay minimum wage or overtime,” they explain. “That’s the good news. However, when not done correctly, independent contractor classification is fraught with risk and lots of potential legal liability.”

Read the article.

The Office of Management and Budgets (OMB) has issued a memo mandating that all billing and invoicing from government contractors and federal agencies must be electronic. Approximately 12 million invoices still need to make the transition, report two partners in Alston & Bird.

They advise that government contractors and payment service providers should be prepared to implement clear, practical methods of e-payments.

“Pilot programs in the federal government – both pure payment-vendor relationships and added services to banking relationships – are available to facilitate the OMB-directed shift to e-invoicing,” says Jeff Belkin, partner and leader of Alston & Bird’s Government Contracts Group with expertise in complex government contract compliance issues. “While it is unclear if the shift to e-invoicing will ultimately end in a no-fee electronic payments program, or, a model that requires the government (or its partners) to pay others to facilitate the program, there surely will be many challenges before that final equilibrium is reached.”

“As of July 2015, a mere 40% of invoices were processed using e-invoicing,” says Tony Balloon, partner in Alston & Bird’s Financial Services & Products Group, who has deep knowledge of the payments industry. “Though the initial transition leading up to the 2018 deadline will be challenging, the adoption of e-invoicing will result in increased efficiency and timely payments for both federal agencies and government contractors.”

Most questions of arbitrability can be resolved on motion, using a summary judgment-like standard, writes Liz Kramer in Stinson Leonard Street’s ArbitrationNation.com. “However, just like summary judgment, if there are genuine disputes of material fact about whether a claim must be arbitrated — like competing evidence about whether the parties ever formed an arbitration agreement — those should be determined by a trial.  That is the lesson of three recent cases from the Third Circuit, the Ninth Circuit, and the Supreme Court of Alabama.”

She writes that the very existence of an arbitration agreement can be hotly disputed. “For contract negotiators, that means it is critical to obtain (and retain) a signed copy of the final agreement including the arbitration clause. For advocates trying to enforce agreements, that means it is critical to recognize when to give up on motion practice and ask for a trial on the issue, so that you don’t waste years on appeal, only to get sent back to square one.”

Read the article.

While an agreement to negotiate in good faith can be enforceable, like any other agreement, it must be expressed as a contractual commitment and not just noted as an intention or expectation, writes Shep Davidson in The In-House Advisor published by Burns & Levinson.

“Failing to understand this distinction and/or draft a contract carefully in this regard, could result in your client having no recourse for the other party’s failure to live up to its promise,” he writes.

He discusses the case of Schwanbeck v. Federal-Mogul Corp., pointing out that the case shows “that if you really want an agreement to negotiate in good faith to be enforceable, you have to be precise in how you describe what the parties will and will not do going forward.”

Read the article.

If you are working with a third party on a term sheet, letter of intent or memorandum of understanding (an “LOI”) on what you view as a non-binding basis, make sure to say so explicitly in the LOI, advises Perry Patterson of Buchanan, Ingersoll & Rooney.

“Businesses use LOIs with each other all the time to negotiate and to develop a set of deal principles to be used in a final agreement, on anything from an acquisition to a significant commercial agreement, or conceivably even a key employee hire,” he writes in an article posted on JDSupra.com. “Primarily they serve as discussion documents for the many high level points that need to be agreed upon (in concept) before it makes sense to negotiate final agreements. Most people involved in the development of an LOI assume there is no final deal until the final documents are fully negotiated, signed and delivered.”

He analyzes a recent case from Delaware that has attracted attention both because of the breach of duty to negotiate in good faith that was found and because of the implications it has in determining damages for breach of that duty.

Read the article.

By Christopher Barnett
Scott & Scott LLP

It is common for software solution providers to use third-party products to support the functionalities those providers have developed for their solutions. For example, a network-monitoring solution may incorporate IBM Cognos functionality, or an accounting solution may incorporate a Microsoft SQL Server database. Increasingly, in today’s market, those solutions are hosted over the Internet, and many software publishers maintain licensing models targeted to solution providers operating in that space (such as Microsoft’s Services Provider License Agreement, or SPLA). However, many businesses still prefer on-premises solutions for their business-critical IT solutions, and vendors of those solutions need to be able to accommodate those preferences.

The two principal options for those vendors are:

1. Reselling or otherwise separately procuring on their customers’ behalf the appropriate kind and quantity of licenses to support the third-party software components incorporated in their solutions, and then deploying the solutions and all required third-party components on the customers’ networks, OR

2. Shipping a complete solution to their customers, with all required third-party components embedded at the factory.

In most cases, the first option is relatively simple to incorporate into the procurement process. However, it often may entail more up-front labor and service charges, since the vendor typically will need to support intensively (if not manage) the implementation of all solution components at customers’ locations. For that reason, many vendors are understandably interested in a more turn-key approach, where they can simply ship a packaged product to their customers and then support the implementation remotely. Unfortunately, most off-the-shelf license agreements pertaining to those third-party software components do not allow a solution provider to redistribute the software to end users for a fee. For that, it usually is necessary to enter into a market-specific ISV or royalty agreement.

Under that kind of an agreement, the vendor obtains the right to embed and redistribute specified software components for use in connection with specified solutions, in return for a fee that is typically calculated based on the number of units shipped or the number of users provisioned to use the solution. In theory, that kind of an agreement seems to be reasonable and appropriate, but, as so often is the case, the Devil lurks in the details:

• Narrow Usage Restrictions – In most cases, software licensed under an embedding agreement may be used exclusively in connection with the vendor’s solution and for no other purposes whatsoever. In practice, this may mean that the vendor needs to build its solution to prevent non-compliant usage, which in some cases may be incompatible with how the solution is designed. If that is the case, then the vendor would need to include similarly narrow usage restrictions in its agreements with its customers, and those terms may not be warmly received by prospective customers’ legal departments.

• Defined User Agreements – On that point, the embedding agreements also may include a laundry list of terms that the vendor is required to include in its customer agreements. Those terms almost always are written to be maximally protective of the software publishers’ interests and almost never are particularly palatable to end users. However, absent an amendment to the embedding agreement, the vendors must consider them to be non-negotiable when discussing transactions with new customers.

• Audit Nightmares – Worst of all, many embedding agreements contain audit-rights clauses that give the software publishers not only the right to conduct audits of vendors’ records and facilities, but also the right to audit the vendors’ customers’ compliance with the license terms. Some of those agreements also give the publishers the right to extract licensing fees and audit costs from those customers in the event that non-compliant usage is discovered. In practice, this means that vendors must draft their customer agreements to permit similarly broad and far-reaching audit activity. However, effectively preventing serious or perhaps irreparable damage that could result to the vendor-customer relationship following such an audit is an extremely difficult goal to achieve in any customer agreement.

For all of the above reasons, vendors considering any kind of royalty ISV or other embedding agreement need to carefully scrutinize the terms of such agreements and then carefully consider whether they are willing and capable of satisfying all of the obligations those agreements typically entail. If there is any doubt, it may be far more sensible to undertake a more labor-intensive licensing strategy than to invite the sort of lost business and licensing exposure that can result from non-compliance with controlling agreements.

An article by Dennis Crouch in the Patentlyo.com blog looks at the TriReme v. AngioScore federal circuit court ruling about the ownership of potential patent rights, which the U.S. Supreme Court has repeatedly found initially vest with the inventor(s).

“Corporations must be getting somewhat annoyed with the antics of these pesky inventors,” Crouch writes. “TriReme v. AngioScore centers on an inventorship dispute involving Dr. Chaim Lotan who was previously a paid consultant with AngioScore but who later sold his rights to a competitor TriReme. In the lawsuit, TriReme sued for correction-of-inventorship of three AngioScore patents that do not currently list Lotan as an inventor.”

“So far in our law, the set of potential ‘inventors’ is limited to human persons (not corporate persons or machines or macaques). The initial right may, however, be transferred to through an assignment agreement.” according to the article.

Read the article.

Noncompete agreements are becoming boilerplate in employment contracts, and for employees, there’s nothing good about them, writes Patrick Thibodeau in ComputerWorld. He writes that these agreements create enormous uncertainty about future job options and worry about launching a new business, and their use is spurring legislative fights in leading tech-industry states.

He refers to one recent survey, with more than 11,500 respondents, that was conducted by three law professors. That survey found that about one in five workers have signed noncompete agreements.The report also looks at legislation in several states that could address the use of the agreements.

Read the article.

SpringCM, a document and contract management solution for Salesforce customers, has announced that it has been named a Salesforce Platinum Cloud Alliance partner.

As a Salesforce Platinum Cloud Alliance partner, SpringCM gains access to executive sponsorships, marketing tools, field sales alignment and product alignment, including early access to user interface releases. The net result is greater SpringCM innovation for Salesforce customers, according to a SpringCM release.

“The Platinum Partner designation gives us access to a comprehensive and broad set of resources, people and support – from Salesforce product managers to developers, marketers and executives – and translates into direct benefits for our customers and partners,” said Greg Buchholz, CEO of SpringCM.

The release continues:

SpringCM’s next-generation contract lifecycle management (CLM) app helps companies streamline contract processes through automation, with fully integrated and configurable cloud contract generation, workflow, and processing capabilities within a secure searchable repository.

“Salesforce supports a vibrant and populous ecosystem of independent software vendors and consultants, and SpringCM joins an elite group of Salesforce partners,” said Karry Kleeman, Chief Revenue Officer of SpringCM. “The successful implementations of our document and contract management workflow solutions are the drivers for this achievement, and we’re honored to reach this milestone.”

“Salesforce customers are looking to accelerate revenue, reduce costs, and improve the productivity of sales reps using the Sales Cloud,” said Mike Festa, Vice President of Sales for SpringCM. “One way to do that is integrating Platinum Partner apps like Steelbrick’s CPQ and SpringCM’s CLM. Our partnership with Steelbrick in 2015 generated a tremendous ROI for our joint customers, and with the recent acquisition of Steelbrick by Salesforce, we see this partnership accelerating further.”

SpringCM grew its Salesforce.com contracts management customers by 400 percent in Q4 2015, driven by five CLM product releases in calendar 2015. More than 150,000 companies call the Salesforce ecosystem home, and many leverage the platform, including tools like SpringCM Manage It™, the No. 1-rated CLM app that enables sales and legal pros to easily manage and automate the contracts process, from contract generation and review, to approval and renewal.

On a superficial level, an Outer Continental Shelf oil and gas mineral lease is an ordinary two-party contract between the federal government and a willing third party, write Anthony C. Marino and C. Jacob Gower of Slattery, Marino & Roberts of New Orleans.

“However, an OCS lease implicates far more than the usual ‘four corners’ of the contract because lessees and their agents must navigate a labyrinth of rules and regulations to remain in compliance with their lease obligations. Given the large volumes of oil and gas production from the OCS, understanding this maze is a daunting, yet important, task,” they write.

SpringCM, provider of a global document and contract management solution for Salesforce customers, has announced Track It for Deal Visibility. The app provides sales and legal teams, contract managers, and executives insight into the status of any sales document – SOWs, MSAs, contracts and others – via mobile and desktop devices, including Salesforce1, according to a release from the company.

“Track It follows each document, giving users an understanding as to where the process is being held up. Users get unparalleled visibility to avoid contract bottlenecks and to help accurately forecast when deals will close,” the release continues. “Data on how long each step has taken in the workflow can then be rolled up into deeper analytics.”

“SpringCM’s Track It was built to monitor documents at crucial points along the contract lifecycle and to deliver key insights,” said Greg Buchholz, CEO of SpringCM. “Sales reps know precisely what needs to happen to get their contracts signed. For example, if I’m on my iPhone, I can launch the Salesforce1 app, click on my 10 opportunities, and know exactly where the contract and other deal-related documents like MSAs and SOWs stand in each of these 10 opportunities. This kind of intelligence is a market differentiator and available only through the SpringCM platform.”

The release continues:Sa

Track It works in conjunction with File It™, a powerful sales content management system for easily creating, storing, organizing, accessing and sharing documents from Salesforce objects like Accounts, Opportunities, Cases and more. Leveraging SpringCM’s Manage It™ functionality, users can create complex MSAs by selecting legal language from templates and clause libraries to speed the contract lifecycle management process.

“One way to look at the impact the Track It functionality has on contract management is in the context of shipping and receiving a package,” Buchholz said. When you have sent a package or are anticipating receiving one, isn’t it valuable to use the shipping number to know exactly where it is and when it is expected to be received? Well, SpringCM brings that level of visibility to all customer-facing deal documents, with the added ability to take action to accelerate them when they get bogged down. Sales has often said that contracts go into a ‘black hole.’ We bring light back to the process.”

Track It can be used in Salesforce or with any other CRM software, or directly within the SpringCM platform. Track It also aggregates data around contract workflows, giving decision-makers and salespeople historical perspectives to inform present and future contract matters.

To learn more, see this video.

About SpringCM
SpringCM is a secure cloud platform that manages contracts and all types of documents seamlessly across desktop, mobile and partner applications like Salesforce. SpringCM goes beyond standard contract management software with advanced workflows that automate manual tasks and complex processes to shorten contract cycles from weeks to days, and speed time-to-revenue. For executives looking to strategically leverage contract management to deliver immediate savings and accelerate revenue, SpringCM is the No. 1-rated contract lifecycle management (CLM) platform because of its superior technology, diverse capabilities, and low total cost of ownership. Every day, more than 600 organizations, including best-in-class companies like NCR, Blue Cross Blue Shield, and Wolters Kluwer, use SpringCM to streamline internal sales and legal operations, improve the customer experience and get more done, faster.

Myanna Dellinger of the University of South Dakota School of Law has posted a discussion of a recent case in which a judge faulted Uber with presenting its drivers with a contract that was “likely, frankly, to engender confusion.”

Dellinger wrote about the case in the ContractsProf Blog.

The underlying case is a class action lawsuit against Uber for allegedly misclassifying its drivers as “independent contractors” instead of regular “employees.”

“Whether this is an example of deliberate strong-arming or intimidating the drivers into not joining the lawsuit or simply unusually poor contract drafting may never be known. Judge Chen did, however, order Uber to stop communicating with drivers covered by the class action suit and barred the company from imposing the new contract on those drivers,” Delinger writes.

Read the article.

The New York Supreme Court ruled that the United Nations Convention on Contracts for the International Sale of Goods applied in a contract case in which the plaintiff claimed that the defendant had delivered a nonconforming product that caused $1.7 million in damages plus interest and costs to the plaintiff.

David Zaslowsky and Grant Hanessian of Baker & McKenzie wrote about the case on Lexology.com.

The court denied the majority of the defendant’s dismissal motion, finding the CISG “automatically” applies “when a transaction involves a sale of goods between parties whose places of business are in different countries and those countries are parties to the CISG.”

The case also involved the statute of limitations and the borrowing statute.

Read the article.

Sometimes rescission of a property purchase is better than suing for damages, which could limited to the difference between the price paid and the value of the property received, advises Khanh Tran on the blog of Continuing Education of the Bar ● California.

Although rescission makes particular sense when recouping the purchase price is more important than living in the house, it’s not always available, he writes. He advises checking to see if certain common grounds for rescission in the real property sales context apply.

Those grounds include mutual consent, mistake, fraud, failure of consideration, illegality and prejudice to public interest.

Read the article.

All bitcoin transactions are smart contracts, points out Chris DeRose on AmericanBanker.com. “Many institutions, which are increasingly exploring the use of blockchains for value settlement, have been similarly dabbling in the application and uses of smart-contract technology,” writes the community director of the Counterparty Foundation.

“Smart contract” essentially means “programmable money” or self-automated computer programs that can carry out the terms of any contract.

“The finer points of what programmable money is are still being worked out by enthusiasts, but most agree that it is a financial security held in escrow by a network that is routed to recipients based on future events, and computer code,” writes DeRose.

Read the article.

The term “big data” as it relates to contract management generally refers to data that is so large or complex that it cannot be processed by any traditional means, ContractRoom says in an article published on its website.

New technology allows for the analysis of this big data and this is changing the way business is being done. This is because the information generated by the analysis is leading to greater operational efficiency, cost reduction and reduced risk.

The article addresses methods of handling and analyzing big data.

Read the article.

Mitratech will present its software solution called “GettingContractsDone” (GCD) in a webinar Feb. 10 at 1 p.m. CST. The company says GCD was designed specifically for busy departments of all sizes seeking to manage contract creation, processing and execution with a powerful, yet easy-to-use and implement, contract management solution.

Organizations that typically select GCD as their contract management solution are:

• Small groups that need a seamless way to receive and work on contracts from any number of business stakeholders
• Legal teams that only need a system for their transactional (non-litigation) matters
• Organizations that require a single system of record to store historical contracts and generate reminders around milestones and renewal dates
• Contract teams that want a way to easily collaborate using a hosted solution

Register for the webinar.

As National Slavery and Human Trafficking Prevention Month, January 2016 offers the opportunity for federal contractors to reflect on the significant regulatory changes to the Federal Acquisition Regulation (FAR) that occurred in 2015 as part of the fight to end human trafficking in federal contracts, according to an article published by Venable LLP.

“For instance, contractors should take this opportunity to evaluate the effectiveness of the internal mechanisms established to comply with the new regulations. Contractors should pay particular importance to the effectiveness of their policies because noncompliance can lead to criminal, civil, and/or administrative consequences, as well as the declination to exercise options, contract termination, suspension of contract payments, and/or loss of award fee,” the article says.

Authors of the article are Paul A. Debolt, Dismas Locaria, Melanie Jones Totman and Michael T. Francel.

Read the article.

eSignLive is offering a free ebook that provides an introduction to electronic signature laws around the world.

Electronic signatures are in use across the globe, the company says. The widespread adoption of e-signatures has been supported by electronic signature laws around the world, including the Americas, Europe, Middle East, Africa and Asia-Pacific. Many of these are based on a model law enacted by the United Nations Commission on International Trade Law – Model Law on Electronic Signatures (2001).

Today more than 75 countries that recognize the legal validity of e-signatures. This eBook covers:

• The three forms of electronic signatures – Basic, Advanced and Certificate/Qualified E-Signatures;
• A list of e-signature types allowed by each country;
• Links to resources such as the Database of Electronic Signature Legislation;
• Information about data residency and privacy laws.

Download the ebook.

By Stephen Pinson
Scott & Scott, LLP

Software and service contracts come with many potential risks, and businesses should be mindful when initiating a new contract or a renewal. It’s considered a best business practice to negotiate the terms in a software or service contract before agreeing to the initial terms a vendor provides in the contract. There are many contract provisions that can be negotiated, but the major risk provisions found in most contracts are the following: (1) Limitation of Liability, (2) Indemnification, and (3) Warranty. These contract provisions must be considered in conjunction with one another because they cannot be effectively negotiated without determining how they affect each other.

Limitation of Liability ranks as one of the top contract provisions negotiated in a software contract. The limitation of liability limits each party’s liability for breach of contract or list of damages for all sorts of harm. A software publisher’s liability is usually limited to the amount of fees paid to the vendor or a fraction thereof. The risk in not negotiating these terms is that the licensee is capped at the amount of damages. This cap may not equate to the actual amount of harm. The best way to negotiate these contract provisions is to write the provision in such a way as to: (1) increase the damage cap, (2) negotiate insurance coverage, or (3) negotiate a limitation carve-out that excludes certain type of claims from the limitation of liability.

An indemnity clause requires one party to bear the monetary and defense costs, either directly or by reimbursement, for losses incurred by a second party. It shifts potential costs from one party to another. One potential claim is an intellectual property (“IP”) infringement claim. The licensee may seek reimbursement for costs incurred in defending a claim by a third party that the licensed software infringes on the third party’s IP rights. For this reason, licensees should be careful to negotiate appropriate protections for third-party claims.

The best way to negotiate this contract provision is to include indemnification provisions that the software or service provider will be responsible if the licensed software infringes the IP of a third party by requiring the software or service provider to do the following: (1) purchase a license to the infringing code in order to be able to legitimately provide it to you; (2) modify the infringing code so that it no longer infringes the third party’s IP rights; (3) replace the infringing code with code that does not infringe the third party’s IP; or, if none of the above solutions are possible, (4) the software vendor will refund the license fees (but be careful, the license fee rarely will be enough to compensate for losses suffered if the software vendor has infringed a third party’s intellectual property). There are also indemnification provisions that can be negotiated for harm that is suffered from a service provider that provides services on business property, such as bodily injury, death, or damage to real or tangible, personal property resulting from the negligent or willful acts or omissions. These also need to be carefully negotiated to avoid any potential risk.

A warranty in a software or service contract is (1) a formal promise by a vendor that the product is defect free or that the service will be performed in a workmanlike manner, and that if it fails to do so, (2) how the vendor will go about rectifying the defects in the product or service. The best way to negotiate this contract provision is to include warranties that promise to protect the licensee from failures of warranty. The warranty section should include some of the following warranties: (1) the software or service provider has necessary equipment and trained personnel to perform the services consistent with industry standards, (2) the services will be performed in workmanlike manner (3) the software or service provider will comply with all applicable laws (4) the software or service provider warrants that it maintains an information security process with physical safeguards appropriate for the sensitivity of customer information (5) warrants that the software will perform its functions and (6) warrant the software shall be free of material or hidden defects.

Remember, it is always important to seek advice from experienced counsel in order to understand all the risks involved when negotiating software and service contracts.