5 things bad record keeping can mess up

top legal issues for tech bus

Keeping corporate records and contracts in one place – and keeping a ticker system reminding of important dates and actions needed – makes it easier to find documents and reduces the risk that something gets missed. This simple task can save a lot of time, money and embarrassment.

Here are 5 examples of things that bad record keeping can mess up.

  1. Domain names need to be renewed annually. If a renewal gets missed and you lose your domain name, or your website or email systems goes down because you forget, it can be devastating.
  2. If you can readily put your hands on supplier and customer contracts, it can help resolve potential problems quickly.
  3. Mundane agreements for things like water coolers, copiers, and postage meters often have terms that automatically renew. You can easily get stuck with these for far longer than you wanted, or at prices far higher than needed if you don’t terminate them at the right time.
  4. Other agreements, like office leases, require a positive step to renew them by a certain time. Failure to do that can result in a less favourable renewal deal, or perhaps even result in the end of the lease.
  5. Being late for or missing payments that are not triggered by an invoice can cause problems. Income tax and other source deductions and HST payments are prime examples that can even result in personal liability for directors. Being chronically late for recurring payments such as equipment leases or internet access can put those arrangements in jeopardy and affect your credit rating.

Laws that politicians are NOT bound by

I’ve seen complaints suggesting emails from those running in the federal election are spam. But CASL specifically exempts political emails from the definition of spam. A recent review of political emails by a mail service provider showed that they are not even trying to comply with the spirit of CASL – such as having unsubscribe mechanisms and contact information.

It’s never been clear to me why those making laws think they deserve to be exempted from many laws they think business need to follow. Perhaps if they applied more laws to themselves some laws might be a lot more user friendly (I challenge any politician or political party to fully comply with CASL and see what a pain it is), and we would be less perturbed with their communications and campaigns.

Here are a few laws that don’t apply to politicians that perhaps should:

  • CASL
  • Privacy
  • Do Not Call
  • Signage bylaws
  • Misleading advertising

Cross-posted to Slaw

Promotional Contests – 7 Things that can Get You Into Trouble

top legal issues for tech bus

Promotional contests that give away prizes can be valuable advertising tools when used properly. But they are fraught with legal risk and must be constructed very carefully. They also must include well drafted, legally compliant rules.
Here are 7 things that can get you into trouble.

  1. The Canadian Criminal Code contains rather bizarrely worded, hard to interpret sections making games of chance illegal. Subtle changes in the details of a contest can have major ramifications to what is needed to comply. This is why we so often see things like “no purchase entry” and “skill testing questions”.
  2. The Canadian Competition Act contains disclosure rules for contests around things such as the number of prizes and odds of winning. Unlike the criminal code provisions, these are easy to deal with – but they must be addressed.
  3. The “residents of Quebec not eligible” declaration we often see results from lottery legislation in Quebec. This legislation is such a nuisance to comply with that many just declare that their contests are not offered in Quebec.
  4. Privacy and anti-spam rules affect what you can do with entrant information and what you can send them by email. It is crucial to get these details right.
  5. If the contest is run using a social media platform, they often have their own rules that must be followed.
  6. If the contest includes the submission of something that the entrant creates – such as a photo, video, or essay – the rules must be clear about what you will do with it and contain appropriate permissions and representations.
  7. Contests run online are available to the entire world. Contest laws vary dramatically in different jurisdictions, so you need to limit geographic eligibility. And do you really want to have to ship your prize to Outer Slobovia?

4 tech/geek events from yesterday

Yesterday was a busy day in the tech/geek world.

  1. Edward Snowden got a twitter account yesterday.  His profile includes “I used to work for the government. Now I work for the public.” As I write this he has just under a million followers.  At least he has a sense of humour – the only twitter account he follows is the NSA.
  2. Tesla announced the long awaited Model X SUV, complete with falcon wing doors and a “bioweapon defense mode” button on the air filtration system.
  3. Google announced new updated phones, the release of their new Marshmallow OS, and a few other things.
  4. And on the dark side, Volkswagen announced they are recalling the 11 million vehicles affected by the dieselgate emissions testing software scandal – although not details of what they are going to do or how it will affect performance. Speaking of the dark side, perhaps there was some hidden meaning in the 2011 “the force” VW commercial?

Cross-posted from Slaw

7 things that can haunt you if you don’t document IP others create

top legal issues for tech bus

When employees create stuff (“creative works” in copyright parlance) as part of their jobs, the employer owns it. That includes things like computer code, photos, artwork, promotional material, text documents, and web designs.

But if it is created by someone else, the default is that the contractor owns it, not the company. That includes every possible arrangement you can think of other than employment. It could be an outside design company, some people that you “borrowed” from your friend’s business because they had some spare time or expertise that you needed, or a person you paid to create something.

It is crucial to get in writing either before it is started, or when the material is delivered, an assignment of the material, waivers of moral rights, and promises that they really created it themselves and haven’t “borrowed” it from the internet or some other source.

Here are 7 things that can haunt you if you don’t document IP others create:

  1. Financing, VC funding, or that sale of your business to the 1000 pound gorilla in your space that was your exit strategy can be scuppered if you can’t prove you own things.
  2. That person who helped you out that you now need to sign off is now somewhere on another continent and unreachable.
  3. That person who helped you out that you now need to sign off sees desperation and dollar signs and insists on an outrageous payout for their signature.
  4. That person who helped you out that you now need to sign off insists that the IP was and still is theirs, and that they own a piece of your company.
  5. It may turn out that the person used open source code that has turned your product into an open source product.
  6. It may turn out that the person used code that was not properly licensed and you now have to recode your product all over again.
  7. You may get a demand from an image company insisting on a large payment for the use of images that are now central to your advertising or brand.


More Guidance from CRTC on CASL – it’s still a mess

The CRTC recently published a document with some guidance on implied consent under CASL.

The parts about “Can I send CEMs to an email address I find online?”, “How can I prove I have consent?”, and “What records should I be keeping?” show how difficult, if not impossible, it is to comply with CASL in practice.

CASL and its interpretation is so granular and so nuanced that the average business doesn’t stand a chance of getting it consistently right.   The email address publication relevance issue, for example, is so fraught with risk that it isn’t worth tempting fate with in most instances.   And the level of proof and record keeping that is expected is simply impractical.

In my view CASL does the opposite of what it says it is supposed to do:

3. The purpose of this Act is to promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages the use of electronic means to carry out commercial activities, because that conduct

(a) impairs the availability, reliability, efficiency and optimal use of electronic means to carry out commercial activities;

(b) imposes additional costs on businesses and consumers; …

The compliance costs in terms of dollars, time, and exposure to penalties are simply far too high, and it actually impedes “efficiency and optimal use of electronic means to carry out commercial activities”.

Cross-posted to Slaw

5 Reasons to Avoid Stock Option plans

top legal issues for tech bus

Employee stock option plans can be valuable tools for employee retention and attraction, but for small businesses the pain usually outweighs the benefits.

Here are 5 reasons why.

  1. There is no one to sell the shares to. It’s not as if one can just sell them on a stock exchange. The value of shares of most small businesses is difficult to determine and more difficult to obtain. There is really only value when someone wants to buy or there is a liquidity event – such as VC funding or an acquisition.
  2. Shareholders have rights to information (including financial statements) and rights to vote in some circumstances. A shareholder agreement is a necessity.
  3. Stock option plans have complex tax issues for both the company and the employees with the options.
  4. Getting the plan right, getting the tax issues right, and keeping control over the fate of the shares is not trivial. The legal and accounting costs to set it up can be significant.  It takes managerial time to deal with the plan.
  5. If you want to incent employees, it’s much easier to implement a profit sharing or bonus plan. That can often get the same results, and it doesn’t bring along the legal, cost and time baggage of an option plan.


Privacy Panic Cycle

The Information Technology and Innovation Foundation has released their analysis of how privacy advocates trigger waves of public fear about new technologies in a recurring “privacy panic cycle.”

The report is an interesting read and makes some valid points.  In general, people fear new things more so than things we are familiar with.  Like the person who doesn’t fly much being nervous about the flight when statistically the most dangerous part of the journey is the drive to the airport.

While a privacy panic for emerging tech is indeed common, we can’t summarily dismiss that panic as having no basis.  The key is to look at it from a principled basis, and compare the risks to existing technology.

New tech may very well have privacy issues that need to be looked at objectively, and should be designed into the tech (called privacy by design).

Even if the privacy fears are overblown, purveyors of the technology need to understand the panic and find a way to deflate the concerns.

Cross-posted to Slaw

Incorporation – 5 things to think about

top legal issues for tech bus

Incorporating a new company can be required in many situations. Maybe you are launching a new business. Your current business might be starting a different product line that for some reason needs to be isolated. There might be tax advantages to creating a new business.

Here are 5 things to keep in mind.

  1. From a strict legal perspective only a “Nuans” name search is required. But other searches are a good idea – such as trademark searches wherever your product might be sold, and searches to see if your name is available as a domain name and on various social media platforms.
  2. The corporate share structure and steps needed to bring assets into the company are all tax driven. It is crucial to get tax advice from an accountant up front. Lawyers and accountants routinely work together to get this right.
  3. Share structure and ownership may be different depending on whether the business is family owned, owned by a few founders, or expects to take on new shareholders in the future. It is important to discuss this with both your lawyer and accountant.
  4. All other things being equal, a simpler structure is best. But some situations may require more complex structures including holding companies and family trusts.
  5. In most cases keep your board simple and limit it to the major shareholders.