Cantor Floman Blog

Business Transactions: Entering into a lease. If your business entity is entering into a lease, there are many important questions you need to address. Here are just a few.

• What is the length of the lease? Striking a proper balance between a lease that is too short and one that is too long is very important.
• Is there an option to extend the lease if the location is profitable?
• What assurance do you have that the landlord can’t rent space nearby to someone who competes with you?
• What protection do you have if the landlord experiences financial difficulty?
• Will a personal guaranty be required? For how long?

We can help you address these and the myriad of other important issues that inevitably arise when you are about to lease premises for your business.

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All too often, when individuals or businesses hire website developers, there is confusion over who “owns” the domain name.  A domain name is the last two portions of a web address, for example “cantorfloman.com.” 

Who “owns” a domain name?

Legally speaking, individuals and businesses cannot “own” a domain name. By way of example, when you purchase real property to build your new home, your ownership is evidenced by taking title to the property in the form of a legal deed.  In contrast, when you purchase a domain name to build your new homepage, you do not take title to the domain name.  Rather, you acquire the rights to use the domain name, very much like your right to use a phone number.  The person who owns the rights to use the domain name is referred to as the “Registrar” of the domain name.  Therefore, it is important to be clear as to WHOIS the Registrar of your domain name.

WHOIS the Registrar?

The Registrar is the person whose name and contact information is submitted to the WHOIS database upon registration for and purchase of the rights to use a domain name.  The WHOIS directory is a directory maintained by domain registering agents such as NetworkSolutions and GoDaddy.  The Internet Corporation of Assigned Names and Numbers (ICANN) requires the Registrar to submit contact information to the WHOIS domain registering agent, including name, phone number, address, domain name, and email.  This contact information will become public in the online WHOIS directory.  It is possible to have the Registrar’s information kept private by paying a monthly fee to a third party to act as a proxy contact.  

The Administrator:

Another important position not to be overlooked is that of the Administrator.  The Administrator, or Administrative Contact, is the person who has the legal right to approve any requested changes to the domain, including changing the Registrant.  The Administrator also has access to usernames and passwords.   

What to look for:

To perform a free WHOIS search to see if you are the Registrant and/or Administrator, you can check the WHOIS database of domain registration companies, such as www.NetworkSolutions.com and www.GoDaddy.com. 

Website designers and developers and their clients should work together to ensure that the site design, development, and hosting contacts are clear about whether the client or the developer will be the Registrant and/or Administrator of the domain name.  It is advisable that you retain an attorney with experience in drafting website design and development contracts to advise you in negotiating any terms and conditions of these contracts.  We would be happy to draft or review a website design/development contract for you.

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If your business entity has multiple owners, it is important to have a buy/sell agreement describing what happens following the death or disability of one of the owners. Typically, the agreement provides for the mandatory or optional buy-out of the deceased/disabled owner’s interest in the business.

• Often life insurance owned by the business or by the other owner can be an important tool to assure the availability of liquid funds to purchase the ownership interest of a deceased owner.
• In the absence of life insurance, the purchase price for the deceased owner’s interest will need to come from the operating income of the business; this may put a big strain on the cash flow of the business.
• Although disability buy-out insurance is available, it often is very expensive. For that reason most buy/sell agreements provide that the ownership interest of a disabled owner is paid for over a number of years with the payments coming from the operating income of the business.
• The goal in planning is to balance the need of the deceased/disabled owner to be bought out with cash as quickly as possible against the need of the remaining owner to continue to operate the business profitably.

We can help you sort out all of the complex issues associated with planning for business continuity following the death or disability of a business owner.

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On Tuesday, a federal Appeals Court in the 6^th U.S. Circuit ruled that the government must obtain a search warrant based on probable cause before it can seize and search emails stored by internet service providers (ISPs).  The Court held that email users have a Fourth Amendment reasonable expectation of privacy in the contents of their email accounts.

The Court stated:

Given the fundamental similarities between email and traditional forms of communication [like postal mail and telephone calls], it would defy common sense to afford emails lesser Fourth Amendment protection…. It follows that email requires strong protection under the Fourth Amendment; otherwise the Fourth Amendment would prove an ineffective guardian of private communication, an essential purpose it has long been recognized to serve…. [T]he police may not storm the post office and intercept a letter, and they are likewise forbidden from using the phone system to make a clandestine recording of a telephone call–unless they get a warrant, that is. It only stands to reason that, if government agents compel an ISP to surrender the contents of a subscriber’s emails, those agents have thereby conducted a Fourth Amendment search, which necessitates compliance with the warrant requirement….

Also noteworthy was the Court’s statement “(t)he Fourth Amendment must keep pace with the inexorable march of technological progress, or its guarantees will wither and perish.”

Specifically at issue in this case was The Stored Communications Act, 18 U.S.C. § 2701, a 1986 law that allowed the government to obtain a suspect’s e-mail from an ISP without a probable cause warrant if the email was stored on an ISP for more than 180 days.  In its December 14^th ruling, the Appeals Court found this section of the Act to be unconstitutional.

This decision is significant as it is the first time an appellate court said Americans had this Fourth Amendment protection.  To read the full case, please click here: Warshak v. United States.

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Congratulations, you have a unique business idea and are ready to put your product or service on the open market.  Undoubtedly you thought long and hard about how you wanted your product or service to be perceived by your potential customers or clients.  You’ve likely asked friends, colleagues, parents, spouses, and possibly even enemies, for reactions to the perfect name you want to conduct business under.  You know that the name of your venture is virtually as important as the product it represents.  The name is something that would tell the world about you as an owner, will compliment the company’s logo, will set you apart and hopefully, make you uniquely identifiable to consumers.

You may not readily realize it, but your business identity is much like your personal identity; it should be properly protected.  Just as you take preemptive steps to protect yourself (i.e. unique passwords, screennames, security questions and login information), you need to take preemptive steps to protect your future livelihood.  What you also may not realize (or want to think about because of your desire to get your business started as quickly as possible), this starts, well at the beginning, before any business is actually conducted.

Your business name is like your username on a website.  It is the first thing potential customers will see and hear.  It should be unique enough to catch someone’s eye and descriptive enough so they know what you’re offering.  You have to think about perception.  Holding yourself out as simply, “John,” may not set you apart as you desire.  On the other hand, a handle such as, “Loony2ski” may not give off the image your customers are going to be looking to associate with.  Determining what you wish your business name to be involves similar considerations.

As you come up with potential names it is imperative to conduct a proper search to determine whether use of that name is possible (the same is true with logos, catch-phrases and the like).  There are many “Johns” out there.  If another company is already conducting business under the name you wish to use, you could potentially be subject to trademark infringement claims and an injunction preventing you from conducting business.  It is advisable to perform localized searches on your State’s Secretary of State website to see if there are any companies registered under the name you wish to use.  Traditional internet searches are helpful in that they will alert you as to whether a company already exists with such name.  A trademark search is also essential.  The United States Patent and Trademark Office (USPTO) provides a search database where this can be done.

Conducting these types of searches are necessary because of the potential legal risks involved with using a name already in commerce.  As mentioned above, a trademark dispute can result in serious financial burdens; such as claims for damages a company alleges it suffered from your use of its name, legal fees such company incurred by defending its mark against your use and potentially your lost profit from a court imposed injunction preventing you from conducting business while the infringement claim is being litigated.

So, now you’ve picked a name, conducted a trademark search, and determined it’s available.  How do you protect yourself properly so that others cannot use it, or something similar to it, to profit off your success?  Registration federally with the USPTO and/or locally with your Secretary of State, that’s how.  It is true there is a common law right of protection to an unregistered mark being used in commerce.  However, registration puts the world on notice of your use and locks out other users, much like a password does, from using your name or something confusingly similar.  Registration with the USPTO can be done through its website.  Typically, filing fees are about $325.00 per class of registration.

It is advisable to seek the aid of an attorney that practices Intellectual Property law to ensure the process goes smoothly and you are registering in the proper classes.   An attorney would also be able to draft a “description of goods” (a requirement during filing) that depicts your product or service with enough focus to give you adequate protection, yet general enough to allow your business to expand into new, yet similar, arenas.

The registration process costs money and can take up to a year to complete.  However, the benefits gained by registration outweigh the time and money associated with legal fees and lost revenue due to court imposed injunctions (whether you are arguing for or against one being imposed).  A registered mark also creates some added value in your business venture because it may be considered an asset of your company should you decide to sell it in the future.

With increasing focus on brand identity and the ever growing saturation of the marketplace it is imperative to protect one’s company and its assets, both tangible and intangible.  Registration of a trademark is a relatively easy, and proven, way to do so.  Seek advice from a qualified attorney near you, or ‘contact us’ and we will attempt to answer any questions you may have in regards to protecting your company’s greatest asset, it’s identity.

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Cantor Floman’s own Attorney Allison DePaola recently gave a presentation on the presence of legal issues as it pertains to Social Media. One of the major takeaways should have been that Social Media Policies are not something only large companies with numerous employees need to consider. It is something companies of all sizes and in all industries should implement. This is something a popular sports and entertainment based blog has learned the hard way.

One would think that a blog, which utilizes everyone else’s internet and media missteps would not need such a policy. However, a social media policy does not necessarily only lay out what not to do but can also be very useful to set forth how to do something. With no apparent social media policy in place for its bloggers and contributors barstoolsports.com uploaded to its website, via YouTube a video created by one of it’s own: “How to trick people into thinking your good looking”. The video became one of the top viral videos in the world, with approximately 1.4 million views in 2 days and over 6 million to date. The video was featured on YouTube, Reddit, Digg, as well as in The Sun and on NECN in a television segment.

In the words of barstool’s president himself, “[a]wesome right? Well yeah except nobody knew who [ ] Jenna was because she didn’t say she worked for Barstool and there was no logo, no nothing on it. Just a virtuoso performance by the Barstool Dream Team.” When the point of a blog is to generate readership for advertising and promotion of events, losing out on recognition by 6 million people is tough, to say the least.

If there was a policy in place that advised contributors to imbed a watermark logo on to all original content this is perhaps something that could have been avoided. It’s not realistic to think that a single policy can account for all permutations of situations that are liable to arise. However, it is possible to plan in general terms so that large issues can be avoided in the future.

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On Tuesday, July 13, 2010, Attorney Allison DePaola participated in a “Social Web In Business” panel discussion as part of “Social Web Week CT – 2010” in New Haven, Connecticut. The panel discussion was moderated by Lisa Miksis, publishing editor of Zip06 and included the following participants: • Chris Bartlett – from followcb.com, local writer, blogger, public speaker & seasoned business owner and entrepreneur • Ann Nyberg – of TV News Anchor, WTNH-TV, and founder of anniemame.com, social media & CT business advocate • Sherry Boyd- aka the Retail Goddess, Independent Retail Advisor and advocate for Moms4MedMod • Chef Daniel Lanzilotta – well known foodie and owner of the Mindful Chef and well-versed in use of online media tools • Allison DePaola, Esq. – local attorney versed in the area of Social Media in Business Each of the participants shared their insight as to how Social Media has impacted or changed business and how business flows, and the importance of implementing Social Media in a business frame work. The group discussed examples of the ways in which Social Media can help businesses grow and engage their customers and other businesses in the future. Allison highlighted the legal considerations of Social Media with regards to Advertising/Marketing, Employment Issues, Data Privacy and Security, and Intellectual Property. Also discussed was the impact Social Media may have on growing our Connecticut economy. “Connecticut gets it and will set an example we are rebuilding from the bottom up, social media is helping us to do that. Many more will now prosper because of events just like this put together by volunteers all of whom are working at answers thru this “I’ve been laid off-afraid I’m going to be laid off-or having to reinvent myself” times in which we are living.” – Ann Nyberg

To view a segment of the handout provided along with the presentation, click here.

Many thanks to the #swct crew for coordinating this program and inviting Allison to speak at this event.

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Social media policies.

The ever increasing use of social media by businesses and their employees is a reality that cannot be ignored. Examples include Facebook, Linked-In, You-Tube, and Twitter. Even if you, the business owner, are not a fan of these social media, the odds are that one or more of your employees uses them; moreover, using social media may be an important way to market your business. Here are some questions to think about.

• What can I do to regulate employees’ personal use of social media sites during business hours?
• What can I do if an employee publishes confidential information about the business on a social media site?
• How can I safely market my business on social media sites?

We can help you prepare a social media policy for your business that strikes an appropriate balance between the potentially competing interests of your employees and the business, and, as well, one that allows you to market safely and effectively on social media sites.

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During employment, many key employees inevitably gain access to a vast amount of information that is both unique and valuable to a business.  This information can include customer lists, potential client lists, processes and operations information, trade secrets, or other important information that has been acquired by the business over time.  For many businesses, it is necessary for key employees to utilize this information to build relationships with current and potential customers and to work with and access this information on a daily basis during employment. 

But what happens when employment ends?  How do you, as a business owner, prevent a key employee from taking this unique and valuable information when he or she leaves your business?  Moreover, how do you prevent a key employee from sharing this information with a competitor employer, or using this information to directly compete with you and your business?

The answer depends largely on whether you are just now hiring the key employee, or whether the key employee is currently employed at your business.  While it is best to speak with an attorney to determine which agreements, it any, are appropriate for your business, here is a brief overview of three frequently recommended documents: 

When hiring new employees, the following three clauses and/or contracts can be preventative solutions to these potential problems.  Depending on your business’s activities and operations, it may be advisable for you to have one or a combination of the following three documents:   

(1)  Non-Compete Clause or Non-Compete Agreement.  Inserting a Non-Compete Clause in a contract for employment or having an employee sign a Non-Compete Agreement (Contract) prevents a key employee form working in your company’s industry or business practice area for a specified time period and within a specified geographic area after he or she leaves employment with your company.  The specified time and geographic limitations must be “reasonable.”  What is “reasonable” varies depending on the industry and business practice area, so it is advisable to consult with an attorney when drafting a Non-Compete Clause or a Non-Compete Agreement. 

(2)  Non –Solicitation Clause or Non-Solicitation Agreement: A Non-Solicitation Clause in a contract for employment, or having an employee sign a Non-Solicitation Agreement (Contract) prevents an exiting employee from soliciting your other employees and/or customers for a period of time after he or she leaves your company.  This helps protect your business interests in retaining employees that you have invested time and resources to train, or customers who your business has developed a relationship with, It does so by prohibiting the exiting employee from attempting to entice other employees or customers to also leave your company. 

(3)  Confidentiality Clause or Confidentiality Agreement: A Confidentiality Clause in a contract for employment, or having an employee sign a Confidentiality Agreement (Contract) prevents a key employee from disclosing sensitive company information, such as customer lists and related information, company processes or operations, or trade secrets or future company strategies. 

When dealing with current employees, the question of whether an employer can require existing employees to sign Non-Compete Agreements or Non-Solicitation Agreements as a condition to continued employment has not been clearly answered by the Connecticut Courts.  It is often required that some form of valid “contractual consideration” be given to the employee in exchange for the employee signing the Non-Compete or Non-Solicitation Agreement. 

In many circumstances, requiring an existing employee to sign a Confidentiality Agreement as a condition to exposing them to confidential information within the office is an acceptable practice.  Again, it is advisable to consult an attorney to determine the legality of these Agreements and Clauses for your specific business in your specific business situation.

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The ever increasing use of social media by businesses and their employees offers businesses vast opportunities and benefits for growth, prosperity, and customer outreach, yet simultaneously exposes businesses to great risks. 

Risks can be presented when an employee uses social media to discuss your business’s activities and operations, your business’s other employees, or even you as an employer.  Risks can also be presented when an employee uses Social Media to discuss clients, potential clients, or current or potential business deals.  Consider the following:  

• Your employee is excited about a new client he or she is working on securing – can they Tweet about the client they might sign?
• Your employee is very upset that your office is not recycling newspapers – can he or she write a blog commenting on how environmentally un-friendly your business is?
• Your employee tweets: “@ServiceSam Crunch time! 1 hour left until big presentation but far from done.  My plan: wing-it and make stuff up as I go!

Your clients who follow Sam may not be too happy to hear your employees “wing-it” during presentations

• Your employee dislikes his or her co-worker or dislikes you as a boss – can he or she express these complaints on his or her Facebook profile?
• Can current employees use social media to recommend the work or employment of former employees?
• Your employee receives a new laptop from a network marketing program he or she participates in.  This program frequently sends the employee freebies and encourages the employee to blog, tweet, or post about the freebies.  Can the employee blog or tweet about this freebie on your business websites or blogs without mentioning that this is an “endorsement,” (as recommended by the FTC)? 

Despite these risks, social media can be an invaluable business and brand building tool if used properly.  A balance between the benefits and risks must be struck to carefully draft a Social Media Policy (or “Social Media Guidelines) that can minimize risks, can harmonize employees’ rights to freedom of speech with businesses’ rights to confidentiality and protection from employees posting about work related issues yet can concurrently preserve the positive uses of social media.  A Social Media Policy cannot impose so many restrictions that it paralyzes employees from communicating with the public and potential customers, or prevents employees from offering responsive customer service to current customers.  In many businesses, employees need access to social media just like they need access to phones and email.

Because the size, activities, and operations of every business are unique, your business’s Social Media Policy should reflect its unique characteristics in a way that optimizes the benefits of Social Media but sufficiently protects against the risks.  Additionally, your Social Media Policy should correspond with any other documents already signed by your employees, such as employment contracts, Non-Disclosure Agreements or Confidentiality Agreements, Internet Usage Policies, or Email Policies.  It is important to consult a knowledgeable attorney to discuss drafting a Social Media Policy that is right for your business. 

To get you started, here are some general topics to take into consideration when drafting a Social Media Policy or Social Media Guidelines:

• Define Social Media: Social Media includes any internet based media created and disseminated through social interaction.  Popular Social Media websites include Facebook, Twitter, MySpace, LinkedIn, and YouTube.  But Social Media doesn’t just end there; Social Media also encompasses personal and corporate blogs, interactive calendars, chats, and the like.
• Ensure that your Social Media Policy compliments and conforms to any existing employment contract, internet usage policy or email policy your business currently uses.
• Ensure that your Social Media Policy encompasses all stages of employment – from pre-employment to departure from employment.
• Consider including ways that encourage positive social media use or “social media training” to optimize employees’ use of social media.
• Inform employees as to the procedure you will follow when reacting to unfavorable social media postings or discussions. 
• Instruct employees that the misuse of social media can be grounds for discipline or termination.
• For some businesses, consider regulating employees’ access and use of only certain social media sites and forums for business related purposes.
• Consider regulating employees’ access and use of social media for business purposes or business and personal purposes during work hours. 
• Consider requiring employees with personal blog sites to post a disclaimer notification that the views expressed on his or her blog are those of the individual and not the business.
• Consider reinforcing the importance of employees submitting complaints to appropriate personnel rather than using social media to express dissatisfaction with the business.
• Instruct employees that they are not to use social media to discuss confidential or proprietary information.
• Instruct employees that they are not to use social media to discuss confidential or identifying information pertaining to clients.
• Instruct employees that they are not to use a business email address to register for social media sites or forums that they will access for purposes other than business.
• Instruct employees that they may not use social media to discuss false information about the business, its employees, customers, or affiliates.
• Instruct employees to use common sense and good judgment when using social media for business and personal purposes.
• Appoint someone within the business as the point of contact for overseeing the policy and answering questions regarding the policy.
• Write the policy/guidelines in plain English!  There is no need to complicate things; make the policy/guidelines easy to read and comprehend.  Use examples, when possible, but emphasize that examples are not comprehensive.  

For new businesses, Social Media Policies or Social Media Guidelines can be incorporated into Internet and Email Usage policies.  For existing companies with current internet and email usage policies, a separate Social Media Policy or separate Social Media Guidelines can be drafted and adopted by the business.

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