David P. Crocker, Attorney – Solicitor – Lawyer http://www.davidcrocker.com Tue, 04 Mar 2014 20:02:11 +0000 en-US hourly 1 https://wordpress.org/?v=4.4.11 Software Copyrights: Less Than Meets the Eye? http://www.davidcrocker.com/2014/02/27/software-copyrights-less-meets-eye/ Thu, 27 Feb 2014 20:28:41 +0000 http://www.davidcrocker.com/?p=935 Most developers know, vaguely at least, that their code is protected by copyright and is entitled to the “©” symbol just like the script on the average cereal box. Some developers might even know that their source code is considered a “literary work”, just like Moby Dick. Just how far does this protection go? Come […]

The post Software Copyrights: Less Than Meets the Eye? appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Most developers know, vaguely at least, that their code is protected by copyright and is entitled to the “©” symbol just like the script on the average cereal box. Some developers might even know that their source code is considered a “literary work”, just like Moby Dick. Just how far does this protection go? Come to think of it, just what is copyright and how does it really apply to code? Funny thing, there’s even a recent case that sheds some light about how you decide what code is protected and what’s not. First, though, a general briefing on the subject.

Calling All Authors . . .

Like trademark law, software copyrights protection is derived from a federal statute, the Copyright Revisions Act of 1976 (the “Copyright Act”). Copyright registration and oversight are handled by the Copyright Office, which is a branch of the Library of Congress. The first thing to bear in mind is that the Copyright Act protects “original works of authorship” whether published or
unpublished, from the time the work is created in “fixed form.” Under the Copyright Act, “fixed form” means “any tangible medium of expression, now known or later developed, for which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” A copyright as a work of authorship becomes the immediate property of the author, and only the author, or those claiming rights through the author, can rightfully claim copyright. Now, we know that literary works are protected (that’s your code). In addition, the Copyright Act also protects musical works, including any accompanying words, dramatic works, including any accompanying music, pantomimes and choreographic works, pictorial, graphic and sculptural works, motion pictures and other audiovisual works, and sound recordings.

“Idea” versus “Expression”

Keep in mind that these are broad categories into which many types of authorship may fall. Whether a work is copyrightable rests upon a key distinction between “ideas” and “expressions” of ideas. The Copyright Act states that protection “for a work of authorship” does not extend “to any idea, procedure, process, system, method or operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such works.” “Ideas” may be patentable, but only the “expression” of an idea may be copyrighted.

“Originality” is Key

As we previously noted, the Copyright Act applies to “original” works of authorship. Just how original must a work be to enjoy protection? The answer is simple: not very. To be considered original, a work must merely embody something more than a trivial change or modification. It does not have to contain new thoughts, or some special artistic innovation. For instance, thousands of books have been published about Abraham Lincoln or the Civil War and countless artists have painted roses. Some new expression is required to copyright variations on a theme. When it comes to painting, the artistic texture, composition and form must be
distinguished from other renderings of the same subject matter.

What Are My Rights in Code?

The Copyright Act grants certain exclusive rights and remedies to software copyright holders. Chief among the rights are the rights to reproduce the copyrighted works, distribute copies of the work or prepare derivative works based on the original. Trouble is, what is original and therefore protectable? Code occupies a strange netherworld of creativity because the instructions tend to functional in nature. This inherent functionality tends to push code into the realm of “ideas” rather than “expressions.” Moreover, the functionality itself is, well, functional. This means that it may well flunk the originality test. In a recent case, a federal court set forth the commonly accepted standard to determine whether code is, in fact, protectable expression. A few years back in Torah Soft Ltd v. Drosnin, a software company sued an author and his publisher for copyright infringement because the author reproduced output from the Torah Software program. The output in this case consisted of matrices containing results of search query algorithms utilizing the “Bible Code” popularized by orthodox Jewish biblical scholars and eventually reduced to a software product. The court was left to determine whether Drosnin’s use of the output, derived from databases incorporated within the software product, merited copyright protection. The analysis used by court is instructive as to how much (or how little) of computer code may be protected by copyright.

Abstraction-Filtration-Comparison

The court noted the obvious. Computer programs contain both “literal” and “non-literal” elements. Literal elements consist of the computer program’s “source” and “object” codes, while non-literal elements may generally be described as the “structure, sequence, and organization” of the underlying program. Such non-literal elements include the program architecture, screen displays, and computer-user interface. While non-literal elements may be copyrightable, as one slides from the literal code to more general levels of a program, it becomes more difficult to distinguish between unprotectable ideas, processes, methods or functions, on one hand, and copyrightable expression on the other.

Courts love little “tests.” Because there is a scale of protection when considering nonliteral elements (and to avoid utter subjectivity), the court employed a three-step analysis of “abstraction-filtration-comparison” to weed out the unprotectable elements of the program and determine similarity. Under this analysis, a court first abstracts the program in question, breaking it into its structural parts at varying levels of abstraction. Next, the court filtered out those elements that are not protectable. Finally, the court compared the remaining protectable elements of the Torah Soft program to Drosnin’s work to determine if substantial similarity existed.

Abstraction

In the abstraction process, the court dissected the Torah Soft program into its functional elements. Conveniently, Torah Soft had already presented the court with a list of features that it believed were protectable, thus eliminating the need for any further abstraction.

Filtration

The court then attempted to determine the core of protectable “expression” by employing “filters” to screen out unprotectable materials. The filters through which the material must pass include the requirement of originality, the Copyright Act’s distinction between expression and ideas or processes, the doctrines of “merger” and “scenes a faire,” and the public domain exception.

Originality. As used in copyright, the term “original” means only that the work was independently created by the author rather than copied from other works. It does not mean that the work must be “novel”, only that it possesses some creativity. There must be some intellectual production, thought and conception.

Functional Elements. Copyright distinguishes ideas and functional items, neither of which is protected, from creative and expressive works, which are protected. When one speaks of function, the emphasis is on procedures, processes, systems, methods of operation, concepts, principles, or discoveries, regardless of the form in which they are described, explained, illustrated, or embodied in a particular work.

Merger. The concept of “merger” means that “expressions” are not protected in those instances where there are so few ways of expressing an idea that protection of the expression would effectively accord protection to the idea itself. In the case of software design, efficiency concerns may so narrow the practical range of choice as to make only one or two forms of expression workable options. Efficiency considerations may dictate one or two choices so compelling so as to eliminate any other form of expression.

“Scenes a Faire.” This doctrine states that protection does not extend to expressions that are, as a practical matter, indispensable or at least standard in the treatment of a given idea. Software design is often dictated by considerations such as hardware architecture, software compatibility, design standards and widely accepted programming practices.

Public Domain. It goes without saying that elements taken from the public domain are not protectable. Such items are free for the taking and cannot be appropriated by a single author even though it might be imbedded in a copyrighted work.

Comparison

In the final step, the court compares the protected elements — or “golden nugget” – of a computer program with the infringing work. As the Torah Soft court noted, the focus should be on “whether the defendant[s] copied any aspect of this protected expression, as well as an assessment of the copied portion’s relative importance with respect to the plaintiff’s overall program.”

Conclusions

Torah Soft did not fair well at the hands of the court. The court concluded that the matrices used by Mr. Drosnin were low on originality, were largely functional, were limited in their arrangement by design considerations and contained large portions that came directly from the public domain (like the portions from the Bible). The key here for developers is that any copyright obtained may be “thin” to say the least. Much software design is severely limited by functional considerations and indeed, much code is composed of standard routines generated by the development tools used. Although there may be some modicum of originality, much code would flunk the test.

Law is ever-changing. This briefing is a synopsis only and cannot substitute for personal legal advice. Everyone’s facts and circumstances are different and you should not rely on the contents of this publication to make substantive legal decisions. Please contact me for a further consultation.

The post Software Copyrights: Less Than Meets the Eye? appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
The Taxman Cometh – Software Taxes and Who Pays Them http://www.davidcrocker.com/2014/02/27/software-taxes-and-who-pays-them/ Thu, 27 Feb 2014 19:33:05 +0000 http://www.davidcrocker.com/?p=931 Welcome to the wacky world of software taxes. Computer software is usually considered by the law as “intangible personal property”. And most of the time, there is no sales tax on such property. And this wasn’t for lack of trying by state taxing authorities. They would take the position that software is tangible and try […]

The post The Taxman Cometh – Software Taxes and Who Pays Them appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Welcome to the wacky world of software taxes. Computer software is usually considered by the law as “intangible personal property”. And most of the time, there is no sales tax on such property. And this wasn’t for lack of trying by state taxing authorities. They would take the position that software is tangible and try to tax its separate sale or licensing. Then the courts would overturn the rulings. Software developers were usually winning until state legislatures changed the tax codes. So, a bit of history is in order.

In pre-historic times (say, about thirty years ago), software was typically sold as part of a computer system and was never seen as separate from it. Then IBM began to unbundle software and sell it separately from the hardware. Then along came the PC revolution and unbundled software became the multi-billion dollar consumer industry it is today. As long as the software was viewed merely as part of the hardware, it didn’t really create a separate sales tax opportunity because it was deemed tangible.

But if there’s one thing that state legislators can’t overlook, it’s new sources of revenue. When the potential take is thought to be small, it usually doesn’t appear on legislative radar screens. When the PC came along, however, software became a mass-market, consumer-driven product and squarely in the tax collectors crosshairs. State – and even local – taxing authorities were literally itching to tax this revenue.

But what types of taxes do the revenuers try to levy on software vendors. How big is your imagination? Here are a few.

The Sales Tax. Normally, a state imposes a sales tax on sales of tangible personal property sold at retail or on taxable services. The retailer or service provider is usually responsible for collecting and remitting the tax to the state or locality when the sale price changes hands. Usually, a seller in interstate commerce does not have to collect and remit sales tax though the buyer may have to pay a use tax. There are distinct caveats to this generally rule, however, so don’t rush this one.

The Use Tax. States impose a use tax on the users and consumers of tangible personal property. States collect the tax to cover their flanks: they want to make sure that purchasers of goods don’t avoid the sales tax by buying their goods in another state. Use taxes are assessed at the same rate as the sales tax – which is another indication of its purpose. In the case of use taxes, however, a buyer usually gets credit for taxes paid in another state. Note, however, that you may have to pay a use tax even in situations where there is no sales tax. A sale may be deemed “occasional” and therefore not subject to sales tax. The buyer, though, may have to pay a use tax on the items acquired. Message: the state usually collects one way or the other.

The Property Tax. Many – if not most – states impose a tax on tangible business property, including office equipment and inventory. When it comes to software, however, the issue is who pays the tax on licensed software. In theory at least, the licensor retains title of the licensed software and the contract must carefully specify who pays the property tax – the licensor or the licensee.

The Gross Receipts Tax. Here’s a wide net. This tax is imposed on a business’s gross income from business retail sales and leases. It’s similar to sales and use taxes but with a GRT the state taxes everything – all business income – and not just certain transactions.

The Excise Tax. This is a particularly odious tax, based on a percentage of an item’s value and imposed on the owner and possessor of specified property without regard to how the owner obtained the property. Most of us are acquainted with the excise tax through our cars and trucks. When it comes to software, it’s similar in outcome to sales, use and gross receipts taxes.

But the most pernicious and pervasive of all these taxes are the sales and use taxes – and these are the ones that invariably trip up software vendors. How these taxes are assessed depends on a set of common (but not universal) definitions – but be advised that these definitions get applied in the first instance by the tax collectors themselves. And tax collectors have very creative minds and there’s no uniform, 50-state rule when it comes either to definitions or application. But here are the main talking points:

“Software” typically means an application that can be obtained separately from hardware. Anything not obtained separately (like firmware, middleware and preinstalled applications) are not assessed in most jurisdictions. “Canned Software” is software generally obtained at retail. “Custom Software” is software specifically developed for a single customer. “Customization” relates to the taxation of programming and implementation services for software that would otherwise be considered “canned” software. “Support” relates generally to telephone help desk support. “Installation” refers to the taxation of separate charges for travel and installation.

“Downloads” relates to software obtained by download. This is very tricky because some states tax all software, however obtained, while others exempt downloads. Other states tax what comes through the Internet while others exempt telephone downloads (even though most telephone services utilize the Internet at least in part).

“Maintenance” relates to maintenance services – which can include software updates or debugging services. “Training” is sometimes taxed as a separate service. “ISP” services are usually taxed. “ASP” services are sometimes taxed.

As noted, there’s no 50-state rule. It tends to be a matter of separate application – and negotiation.

And you thought that it was your job merely to run a business.

Law is ever-changing. This briefing is a synopsis only and cannot substitute for personal legal advice. Everyone’s facts and circumstances are different and you should not rely on the contents of this publication to make substantive legal decisions. Please contact me for a further consultation.

The post The Taxman Cometh – Software Taxes and Who Pays Them appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Rights of Publicity in the US and UK http://www.davidcrocker.com/2013/06/25/the-quick-and-the-dead-rights-of-publicity-in-the-us-and-uk/ http://www.davidcrocker.com/2013/06/25/the-quick-and-the-dead-rights-of-publicity-in-the-us-and-uk/#comments Tue, 25 Jun 2013 12:03:55 +0000 http://www.davidcrocker.com/?p=898 Ever wondered about the paparazzi who shove cameras in celebrities’ faces and then publish the pictures? How do television networks get to air miniseries on the life of Princess Di? Did you ever play with Lincoln Logs? Should Napoleon brandy makers have to pay a royalty, or has the old boy been too long in […]

The post Rights of Publicity in the US and UK appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Ever wondered about the paparazzi who shove cameras in celebrities’ faces and then publish the pictures? How do television networks get to air miniseries on the life of Princess Di? Did you ever play with Lincoln Logs? Should Napoleon brandy makers have to pay a royalty, or has the old boy been too long in the ground? All these situations illustrate the “right of publicity”, which protects our names and likeness from commercial exploitation. Let’s take a look first at US and then very briefly at England and Wales.

Back in the USA

The right of publicity was first recognized by the federal courts in 1953 as the right of an individual to control the commercial exploitation of his or her name or likeness. There are two rationales for protecting an individual’s right of publicity. The first is to prevent “unjust enrichment” through the unauthorized goodwill; the second is to provide an economic incentive to individuals to provide performances of interest to the public. This right is commonly recognized these days and at least eighteen states protect the right by statute with thirty-six other states providing common law protection. Such law varies widely from state to state and can apply to both the living and the deal.

Publicity rights can cover, among other things, a person’s name, voice, signature, photograph, image, likeness, distinctive appearance, gestures or mannerisms. These attributes are generally considered property and their value can be both controlled by the living and, for the dead, passed on to future generations. It often does not matter if the person exploited his or her persona when living. The focus, instead, is usually whether or not the persona itself has commercial value.

What’s not covered by right of publicity? First Amendment issues, of course, do come into play. In the name of persona-protection, the living cannot, generally speaking, cut off fair comment about their lives or careers. Material with political, historical or newsworthy value usually is not affected by right of publicity statutes. The relevant law tends to focus instead on “commercial purposes”, which usually entails use on or in connection with products, commercial activities, or advertising for such products and services.

As to the dead, one may generally represent a deceased person in a play or a movie, and picklock biographers generally operate without restriction except that they must be more careful when they refer to the living in their works. As to commercial activities, the right of publicity does not last forever. After a number of years after death (as long as 100 years), the “persona” becomes part of the public domain. During a famous person’s lifetime, however, and for at least a lifetime or two thereafter, certain heirs can protect the right of publicity. Qualified heirs can lease it, license it, sell it or even prohibit certain uses.

Naturally, portraying the dead causes no small amount of heartburn for writers and producers. There is one school of thought, for instance, that holds that the rights in one’s “persona” should be viewed differently from copyright in a deceased person’s books and that once a person dies the persona belongs to the public. Another school holds that if an individual spends his life creating the value of his image, that is no different than creating a book or building up any other business and should be preserved for the heirs for a time.

Due to First Amendment considerations, a living person’s persona is a bit more dicey than the dearly departed. Generally, the law tries to strike a balance between an individual’s right of publicity and free speech rights. The greatest protection is provided for news, lesser protection is provided for entertainment and fiction and the least protection is available for advertising uses where a portrayal of a real person’s identity is used to sell a product or service.

When it comes to “newsworthiness”, the concept includes real-world information including current news items, news that has occurred in the past and information that is not strictly news, but is still informative, media presentation on “public issues”, factual and historical material for education; and entertainment and amusement concerning interesting aspects of a particular person’s identity. When analyzing newsworthiness, pay attention to a couple of factors: first, is the unauthorized use of an individual’s persona really news? Second, is there a reasonable connection between the use of the individual’s persona and the news being conveyed?

Using an individual’s persona in connection with a “news” or “public interest” story requires a reasonable relationship between the person’s persona and the story itself. If there’s a connection, then the right of publicity must yield to the First Amendment. To succeed on a right of publicity claim, a claimant would have to demonstrate that his persona was used merely as the flag to attract attention to the news or entertainment message. Likewise, an individual cannot suppress photographs that were taken in a public place to illustrate a newsworthy story.

Oh, to be in England

The law in England and Wales is less developed than the United States and English courts seem to have trouble deciding whether to refer to “celebrity”, “personality”, “character”, “publicity” or “image” rights. “Publicity” and “image” do perhaps make the point more clearly and avoid the difficult label of “personality”, which in some cases may seem less in evidence than the image itself. But as a very general matter, publicity rights relate to the concept of “passing off”. Under English law, actionable passing-off requires that (1) the claimant has goodwill associated with his name and image; (2) the defendant has made a misrepresentation likely to confuse the public into associating the defendant’s products or services with those of the claimant, and (3) there is loss or the material prospect of loss to the claimant. But to get anywhere in England, however, you often need to resort to a patchwork of other law, including copyright, trademark, breach of confidence, and violations of the Data Protection Act.

Law is ever-changing. This briefing is a synopsis only and cannot substitute for personal legal advice. Everyone’s facts and circumstances are different and you should not rely on the contents of this publication to make substantive legal decisions. Please contact me for a further consultation.

The post Rights of Publicity in the US and UK appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
http://www.davidcrocker.com/2013/06/25/the-quick-and-the-dead-rights-of-publicity-in-the-us-and-uk/feed/ 1
Open Source Software: Blessing and Curse http://www.davidcrocker.com/2013/06/03/open-source-software-the-blessing-and-the-curse/ Mon, 03 Jun 2013 18:20:42 +0000 http://www.davidcrocker.com/?p=881 Open source software is both a blessing and curse. It’s truly a blessing for the software developer because the huge and growing open-source libraries provide tested and standardized functionalities that make a geek’s life that much easier. Using open-source, companies are able to reduce the time to market for new products, lower costs for maintenance […]

The post Open Source Software: Blessing and Curse appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Open source software is both a blessing and curse. It’s truly a blessing for the software developer because the huge and growing open-source libraries provide tested and standardized functionalities that make a geek’s life that much easier. Using open-source, companies are able to reduce the time to market for new products, lower costs for maintenance and licensing and save development resources for unique and proprietary functionality that sets one product apart from another.

Even “proprietary” software these days incorporates open-source to a greater or lesser degree. For instance, I am counsel to a U.S. software company that offshores a good deal of its development. The proprietary product contains a goodly collection of open source which, when I dutifully listed it in the license, took an entire page. This is by no means unusual. When this same company when through a venture capital round, the use of open source was accepted as a matter of course. But you can be sure that counsel for the VCs worked over my list.

But open source can also be a curse – for the software company’s general counsel, that is. But who cares about the lawyer, anyway? Well, you should, because he is the guy that’s going to keep your geeky behind out of trouble when you license your product, obtain financing or sell your company. Think of the headaches in a large organization: in procurement terms, your client might obtain “proprietary” code to sell, OEM or incorporate in a larger application. It’s our job to sort this all out. So, where to begin?

As originally envisaged, the open source movement was a rebellion against the basics of copyright as applied to software: the idea that the author could absolutely control the distribution and derivations of a protected work. For the movement’s founders, the idea was to break the perceived stranglehold of copyright to provide open distribution and use of tested software – and force those who used it to themselves share their own works with the development community. Hence, the software communists tried to create a hook – offer goodies in return for more sharing down the line.

While that was the original intention, what has evolved instead is a veritable Babel of licenses. The Free Software Foundation lists fifty or more. These licenses run the gamut of complexity and applicability. The Berkeley Software Distribution (BSD) license is very liberal, letting the licensee use the particular in just about any way he or she pleases, subject to an “as-is, where-is” warranty. Other licenses tend to be peculiar to the individual developer. Apache, for instance, has a family of similar, permissive, licenses.

The one “free” software that seems to stick out more than any other is the “General Public License”. The GPL is the brainchild of Richard Stallman, one of the founders of the Free Software Foundation. Version 2.0 has some peculiar provisions that give earnest lawyers a migraine. While the GPL doesn’t restrict the running of the licensed program, section 2 of the license does control the creation of derivative works. Specifically, section 2b provides that any work that “contains or is derived from the Program” must itself be licensed under the GPL while distribution of “independent and separate works” do not.

Proprietary developers have a natural aversion to disclosing their own code (much to the righteous disgust of Stallman’s acolytes). But it’s that section 2 that’s the issue: what does “contain” or “derived from” really mean, after all and what’s an “independent and separate work”? Well, it all comes down to “linking”. In early programming, the “contain” part of the equation was more easily understood because code was a unitary work that had a beginning and an end and the open source would have been baked into the whole using a “static” link. For coders today, most open source would be hung off the executable using a “dynamic” link. But the Free Software people have, ironically enough, a proprietary interest in how their own license is interpreted. They wouldn’t want just anyone to interpret it, don’t you know?

In FSF’s view of the world, whether GPL open source is baked in or linked depends on the exact nature of the dynamic link – and that means the mode of communication and information communicated through the link. When a developer uses the normal open source API to do the linking (therefore providing “standard” communication), the FSF takes the position that the open source and the larger proprietary application are separate. What developers have done in many cases is to interpose proprietary code (known as a “shim”) between the open source API and other code to provide “special” communication capabilities. This sort of programming is often found in mass market hardware like DVD recorders and the like. The FSF views the use of shims as creating an integrated work subjecting the proprietary code to the GPL license.

The FSF’s position creates a dilemma for companies like nVidia and ATI. Stallman in particular is reported annoyed at the “Tivoization” of GPL code by folks who dare to use GPL code without taking their own trousers down. Interestingly, no less a personage than Linus Torvald’s seems unbothered by this because the essential goal of disseminating open source has been met. But this is not Stallman’s view, apparently. He and his minions have released version 3.0 of the GPL which is considerably more prolix and confusing. In the prologue, his primary beef is software patents and imbedded code that can’t be replaced by a user. So, version 3.0 seeks to tamp down patent cross licensing while free up “general purpose computers.”

Needless to say, this can make life interesting for the lawyers. In general, it’s necessary to audit open source use and establish corporate policies. How to warrant software becomes more difficult in an open source world. A vendor would necessarily warrant that the application contains no open source or that there is no open source or reciprocal licenses. Or, as is my practice, I simply exhaustively list all open source with references to the licenses. But one question still remains: in an open source world, is a standard third party IP indemnification provision adequate? That’s a subject for another paper.

Law is ever-changing. This briefing is a synopsis only and cannot substitute for personal legal advice. Everyone’s facts and circumstances are different and you should not rely on the contents of this publication to make substantive legal decisions. Please contact me for a further consultation.

The post Open Source Software: Blessing and Curse appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
The UN Convention on Contracts for the International Sale of Goods http://www.davidcrocker.com/2013/06/03/the-un-convention-on-contracts-for-the-international-sale-of-goods/ Mon, 03 Jun 2013 15:10:33 +0000 http://www.davidcrocker.com/?p=869 It’s what you don’t know that can hurt you. Such is the case with the United Nations Convention on Contracts for the International Sale of Goods. CISG (as it’s called) is an international analogue to Article 2 of the U.S. Uniform Commercial Code, and governs contracts for the sales of goods internationally. It was sponsored […]

The post The UN Convention on Contracts for the International Sale of Goods appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
It’s what you don’t know that can hurt you. Such is the case with the United Nations Convention on Contracts for the International Sale of Goods. CISG (as it’s called) is an international analogue to Article 2 of the U.S. Uniform Commercial Code, and governs contracts for the sales of goods internationally. It was sponsored by the UN and opened for national ratification in 1980.

Relevant to US Law?

But how is CISG relevant to U.S. law? Actually, that’s a trick question, because CISG is already U.S. law, having been ratified by the Senate in 1978. Seventy-one signatory countries are listed on the UNCITRAL website (www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html). A couple of very notable non-signers of CISG are the UK and Ireland. Russia and Israel are signatories and have therefore adopted CISG as part of their domestic law. Because it’s US law, the point here is that CISG applies unless the parties specifically opt out. This same point applies as well to parties in other signatory countries.

Adopting Countries

CISG applies to parties having relevant places of business in countries that have adopted it. These adopting countries are known as “contracting states”, but there are some exceptions to applicability, notably when it’s not readily apparent that the parties have places of business in different states. In addition, UNCISG binds the parties regardless of the parties’ nationality and the commercial character of the contract. Further, the convention does not apply when the parties are sharing materials or labor and when the contract consists primarily of labor or services.

Sales of Goods Between Merchants

As the title implies, CISG applies to contracts for the sale of goods, but not all goods. Certain types of goods are excluded. These include stocks, shares, investment securities negotiable instruments, money, ships, aircraft and electricity. Also excluded are goods that are used for personal, family or household purposes and auctions. Basically, CISG applies to contracts between merchants, not ordinary retail transactions.

What Does it Apply To?

Like the UCC or US contract law generally, CISG applies to how a contract is formed and the obligations of the parties. There are notable exceptions to the general statement, however. Article 4 makes clear that CISG only applies to the buyer and seller in any deal. It does not apply to rights of third parties and doesn’t concern itself with issues of contract validity or property in the goods sold. Article 5 states that CISG doesn’t apply to the liability of sellers “for death or personal injury caused by the goods to any person.”

CISG vs. the UCC

CISG differs from both the UCC and general US contract law in several key respects. First, CISG does not recognize the Statute of Frauds, which generally requires some writing signed by the parties to enforce the contract. Second, parol evidence (evidence beyond the written document) is generally not admissible. Third, warranty disclaimers are a completely open area under CISG (unlike the UCC, which permits such disclaimers). Fourth, CISG generally endorses the older “mirror image” rule of contract that existed prior to the UCC. Under this rule, an offer must be accepted exactly without modifications. The offeror is the master of his own offer. An attempt to accept the offer on different terms instead creates a counter-offer, and this constitutes a rejection of the original offer. Finally, when the seller alleges “commercial impracticability” (the seller cannot fulfill the contract except at an unreasonable cost to himself), CISG excuses both parties, not just the seller (as under the UCC). For these reasons (and others), CISG has not been popular with American lawyers and their clients.

Opting Out

It is possible, however, to opt out of CISG. Because it is part of US domestic law, it probably applies regardless of whether parties provide a choice of law provision in the contract document. Article 6 provides that the parties may “exclude” the application of CISG and, with a couple of exceptions, “derogate from or vary the effect of any of its provisions.” Translation: you can vary in whole or in part.

So, it is possible to opt out, but it is necessary to explicitly disclaim applicability. See Assante Technologies, Inc. v. PMC Sierra, Inc., 164 F.Supp 2d 1142 (N.D.Cal. 2001). Be very clear when you do it, however, using a sample clause like:

“The parties agree that the United Nations Convention on International Sales of Goods shall have no force or effect on this Agreement.”

If you do elect to apply CISG, be sure to identify the official language version because translations do vary. There are several official translations and various unofficial versions. Be sure you nail the proper edition.

One final word of caution: CISG doesn’t cover every contingency of every transaction. For example, if there are third-party beneficiary rights involved (which CISG doesn’t recognize), it will be necessary to provide explicit adoption of “gap-filler” law to cover such uncovered contingencies. So, be sure you consult with a competent lawyer as you structure your international transaction. It will be cost-effective in the end.

Law is ever-changing. This briefing is a synopsis only and cannot substitute for personal legal advice. Everyone’s facts and circumstances are different and you should not rely on the contents of this publication to make substantive legal decisions. Please contact me for a further consultation.

The post The UN Convention on Contracts for the International Sale of Goods appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Beware the Chinese Domain Name Scammers http://www.davidcrocker.com/2013/06/03/beware-the-chinese-domain-name-scammers/ Mon, 03 Jun 2013 13:53:59 +0000 http://www.davidcrocker.com/?p=852 I’ve received quite a few anxious calls from clients about Chinese domain registrars trying to entice the client to register their domains in China, ostensibly to protect it from some other entity trying to register it with the .CN top level domain. Here’s a typical note from one of the Chinese registrars with the client […]

The post Beware the Chinese Domain Name Scammers appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
I’ve received quite a few anxious calls from clients about Chinese domain registrars trying to entice the client to register their domains in China, ostensibly to protect it from some other entity trying to register it with the .CN top level domain.

Here’s a typical note from one of the Chinese registrars with the client domain name changed but spelling and syntax intact:

“Angle.zhang” 11:27 PM 8/19/20XX

Dear CEO,

We are Shanghai SPS Network Technology Co., Ltd which is the domain name register center in China.

We have something need to confirm with you, we formally received an application on August 20 20XX.

One company who called StarMax Holdings Limited are applying for following:

Domain Names:
targetcompany.biz
targetcompany.cn
targetcompany.com.cn
targetcompany.hk
targetcompany.net.cn
targetcompany.org.cn
targetcompany.tw

Internet Brand Name:
targetcompany

These days we are dealing with it, so we hope to get the affirmation from your company.

Please let someone in your company who is responsible for trademark or intellectual property rights contact us.
If there is any question, please contact us as soon as possible.

Best Regards,

Angle.zhang

Check Domain Name dept.
shanghai SPS Network Technology Co., Ltd Oversea Internet Domains Accredited Registry
Tel:+(86)21-62296886 | Fax:+(86)21-62296899
Website: http://www.chinasps.net.cn | Email:Angle.zhang@chinasps.org.cn

Now, let’s be clear: registering a Chinese domain name may well be the important first step in preparation for an entry to the Chinese marketplace. However, anyone considering such a move should educate themselves on Chinese registration and administration practices.

The China Internet Network Information Centre (CNNIC) administers Chinese domain names with “.cn”, “.org.cn” and “.net.cn” suffixes and is responsible for appointing authorized domain name registrars. The CNNIC is the administrative agency responsible for Internet affairs under the Chinese Ministry of Information Industry. And like everywhere else, applicants deal directly with the appointed registrars, which process the domain name registration application for a fee, based on the availability of the particular name.

But some of these appointed registrars are now actually approaching companies to solicit domain name applications using an unusual technique: they contact a company, advise that an application has been received for a Chinese domain name incorporating the company’s name or trademark and request the company to contact them to discuss the issue. The Chinese registrar will then try to sell the inquiring company a Chinese domain to “prevent it from being registered by a third party.”

Now, these Chinese registrars are indeed authorized by CNNIC. Needless to say, however, the tactic raises eyebrows. In all likelihood, there are no third party applicants or, if there are, they’re most likely a company associated with the Chinese registrar.

It seems apparent to me that the Chinese registrars are doing some monitoring of trademark applications in China or the US or they’re monitoring trade publications to detect foreign companies that might be entering the Chinese market. But in my experience, there’s often no pattern in the inquiries. I’ve had client companies in Israel, the US and the UK that have received solicitations – but none of them were doing business in China and none were currently applying for a mark in China or anywhere else. So, go figure.

This is certainly not to discourage anyone from registering a Chinese domain name – or even to respond if there is a genuine third-party registration that might interfere with a company’s own registration – especially in cases where an untimely Chinese registration might interfere with a company’s ability to do business in China.

But be advised, however, that if you’re contacted directly by a Chinese domain name registrar, you should be wary that the situation might not be as stated by the registrar. You have no obligation to deal with a particular registrar. More to the point, like most Internet scams, it is probably best not to encourage the scammer by a reply. There are certainly authorized – and reputable – Chinese registrars who will assist you in registering a domain name in China. And seeking the help of a knowledgeable lawyer may well be a wise investment – particularly if you are suspicious about the initial contact.

In cases where there is a conflict, China does have a domain name dispute resolution policy. In China, it’s administered by the CNNIC. You should know, however, that any challenge must be filed in Chinese.

The Internet is a strange place indeed. About fifteen years ago, I likened it to the Wild West and I thought that the system was in the process of hanging the really bad bandits. But there are banditos that come forward to take their place. And why wouldn’t they? The opportunities are there as are the credulous. If you happen to get an email with similar sounding verbiage, don’t panic but don’t let your guard down either. Evaluate the threat. Search your name using Google and other engines and if you really do wish to register in China, by all means do so. There are reputable registrars that will assist you.

The post Beware the Chinese Domain Name Scammers appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Welcome to My Redeveloped Website http://www.davidcrocker.com/2013/05/17/welcome-to-my-redeveloped-website/ Fri, 17 May 2013 17:01:28 +0000 http://www.davidcrocker.com/?p=771 Welcome to my new, improved website, redeveloped by my friend Trevor Bragdon using WordPress and the Prime theme.  I’ve been a blogger since 2008 on my personal site Behind Blue Lines, so I’m an old hand at blogging and WordPress. This blog will be devoted to legal and jurisprudential topics, however, unlike Behind Blue Lines, […]

The post Welcome to My Redeveloped Website appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>
Welcome to my new, improved website, redeveloped by my friend Trevor Bragdon using WordPress and the Prime theme.  I’ve been a blogger since 2008 on my personal site Behind Blue Lines, so I’m an old hand at blogging and WordPress. This blog will be devoted to legal and jurisprudential topics, however, unlike Behind Blue Lines, which is political and cultural.

So, do stop by or, better yet, get on the feed. I can promise some thoroughly decent content.

The post Welcome to My Redeveloped Website appeared first on David P. Crocker, Attorney - Solicitor - Lawyer.

]]>