8 posts categorized "September 2009"

Traffic in Gmaps - iPhones Display But Don't Contribute Data

Google is crowdsourcing to get traffic flow data and publish it back to users via Google Maps. iPhone users, however, appear to be free-riders of the aggregated data. 

That is, while iPhone users can see the representations of traffic flow on the Google Maps app for the iPhone, Apple does not permit Google to collect location information from iPhones. This state of affairs was confirmed by a statement from an Apple spokesperson quoted on the jkOnTheRun blog ("The Google Maps application that comes pre-installed on the iPhone can display live traffic, but Apple devices do not participate in the traffic crowdsourcing").

Why is this?

Under the iPhone SDK Agreement, available here, iPhone apps that use location-based APIs "may not be designed or marketed for real time route guidance," and "[a]pplications that offer location-based services or functionality must notify and obtain consent from an individual before his or her location data is being [sic] collected, transmitted or otherwise used." (Sections 3.3.7 and 3.3.8.)

Of course, the contract merely provides possible "how's" for, and not a "why" behind, Apple's policy. Is it a concern for user privacy? A tactic to reserve more interesting location-based apps for Apple? What of the socially networked iPhone user who would like to participate, to be part of the crowd doing the sourcing?

Twitter's Aggregate Preferred Stock Liquidation Preference Now at $163,817,605.63

Twitter announced last week that it had closed a "significant round of funding." News reports, including this one from the NYTimes, anticipated that the round would raise $100 million.

Well, that estimate was precise.

Twitter raised exactly $100,000,006.86 from the sale of 6,256,883 shares of its Series E Preferred Stock at a price of $15.9824 per share. This is assuming that it sold 100% of the Series E shares that were newly authorized in a Restated Certificate of Incorporation that Twitter filed with the Delaware Secretary of State last Tuesday afternoon.

I've got to find a way to get better at putting columns into my blog posts; but I haven't yet, so, with apologies, here again is another excerpt from a spreadsheet as a pdf.

P074tnAs the chart shows, this brings the preferred stock overhang to around $164 million. (Again, the assumption made is that all shares of each class authorized have been sold.) Because the new Restated Certificate tells us that each series has a 1x liquidation preference, and that no preferred stock series is participating, we can deduce that, in order for the common stock shareholders of Twitter (presumably including the founders) to see value in their equity on any sale of the (assumed debt-free) company, the acquisition price will have to be in excess of $164 million.

I suppose it goes without saying that $164 million is a no-brainer of a target if you are in the stratosphere where Twitter plays, but then there it is anyway as a hard number.

By the way, the Series E does not have a board seat. Every prior series of preferred is entitled to elect a director (leaving one to be elected by the Series A and the common voting together, and two to be elected by all series of preferred and the common voting together).

Pre-Entrepreneurs Ask, "What IP Does My Current Employer Own?"

I don't normally write posts like this, partly as a consequence of my temperament, and partly because other blogs are available with authoritative primers on specific legal questions (e.g., Joe Wallin's and Stuart Campbell's Startup Company Blog, which I believe is one of Kevin O'Keefe's Lexblogs, and Yokum Taku's Startup Company Lawyer blog).

But at Startupday 2009 yesterday in Bellevue, a recurrent question of pre-entrepreneurs in the advisory room sessions was, "how do I figure out what IP [Microsoft/Amazon/my current employer] owns?"

There is a statute (a written law that is on the books) in the State of Washington that lays down a rule for employers, and it is the place to begin whenever thinking through this question (assuming you work for your employer in the State of Washington). This statute is arguably the single most important law for software developers and engineers to read and understand. Certainly, it is important for those who are thinking of starting their own companies, and want to know how to sort out their own IP from the IP that might belong to their current employer.

The statute is RCW 49.44.140, subsection (1) of which reads in full as follows:

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

The statute has two other subsections which essentially support the intent and purpose of the subsection quoted above. But again, if you write code, design systems, or otherwise create IP for your employer and you aren't already familiar with this law, it's worth the investment of 15 to 20 minutes to follow the link above and read the entire statute.

After reading the statute, then review the agreement(s) between you and your employer which contains your assignment of IP to your employer. (Don't recall which document that was? It is important to find it. Now and then, pre-entrepreneurs tell me they think they never signed one, but if you work for Microsoft, another big company, or any VC backed startup, it is highly, highly unlikely that your employer will have failed to obtain an assignment of inventions from you. The only Microsoft employees I know who never signed these kinds of documents are people who have been there 20 years or more.) How does the language in your contract(s) track with what the statute requires? (Note: the third subsection of the Washington statute prescribes a specific notice that employers are required to give in the written contract; check out the third subsection via the link above and determine whether or not your contract has the required notice.)

This statute is not the be-all and the end-all to an IP ownership inquiry, it is merely the place to begin. Other questions often come up. For instance, employers frequently have moonlighting policies; these should be read and understood if you intend to develop something for your potential new startup in your spare time.  

Also, in recent years, I have seen language in employment agreements that attempt to end-run the Washington statute, by purporting to require the employee to grant a right of first refusal on unrelated IP that the employee develops outside of work for the employer. Whether such a provision would be enforceable in Washington is highly questionable; then again, I can imagine and postulate circumstances where a right of first refusal could be appropriate and enforceable (e.g., in connection with a transaction not directly dependent on an employment relationship).

If this post is pertinent for you, then please see Yokum Taku's excellent post, "What do you need to do before you quit your job to form a startup company?" Yokum Taku's post touches not just on assignments of invention, but also the confidential information of your curent employer, and non-compete and non-solicitation clauses that might be in agreements between you and your employer. Be aware, however, that the assignment of inventions statute he references in his post uniquely applies in California. The statue quoted and linked to in this post uniquely applies in Washington State.

Post-script 09/28/09:  After posting the above, I came across an excellent de-brief of the advisory room sessions by Scott Warner of the Garvey Schubert law firm. Scott's comments serve as a very practical checklist for the overall process of detaching from your current employer, in anticipation of starting your own venture.

Startupday 2009: A Real-Time Report From a Sponsor

@calbucci, the impressario of today's impressively successful Startupday 2009 in Bellevue, sent a pre-event email to sponsors (myself and my firm included) in which he candidly stated that the "advisory room" was an experiment that might or might not work.

Well, it worked. Two of my colleagues, Bob and Serena, were there, and the format - attendees, for the price of admission to the event, could reserve 20 minute sessions with attorneys, recruiters and other vendors - gave pre-entrepreneurs the opportunity to ask substantive questions, allowed service providers to connect, and seemed also to facilitate yet additional, informal interaction at lunch and on the floor of the event.

Marcello's events (the first big one was the Seattle 2.0 Awards this past spring in Seattle) are successful, not only because they are well prepared and well run, but because, somehow, Marcello has figured out how to actually draw the engineers and the entrepreneurs he means to support.

The sense of the twitterstream of the event (#startupday) is that 75% of the audience were engineers or developers (exactly what you'd want for a conference to help people think through whether and how to start a new company). Somehow, the other emerging tech organizations in town that let service providers (yep, that would include me) participate end up having their events overrun with service providers! That drains such events of the energy that comes from real curiosity and open inquiry.

Anyway, many thanks to Marcelo and Seattle 2.0. Rich Barton is speaking as I post this. I'll include a pic of the main event floor from when Jonathan Sposato was talking, about 40 minutes ago.

Startupday 2009: A Real-Time Report From a Sponsor

Will Amazon Someday Regret Its Price-Fixing Argument Against the Google Books Settlement?

Whatever the fate of the Google Books settlement - a news report today states that the parties have asked to postpone a final review hearing - I wonder if Amazon may one day rue the antitrust argument it made in objecting to it.

Amazon filed an objection to the proposed settlement at the beginning of September. Two of Amazon's legal arguments were repeated about a week later in Microsoft's objection to the settlement: (1) Congress is the proper body to address the policy problems addressed by the settlement; and (2) the settlement purports to release Google from future bad behavior and not simply past infringement. A third Amazon argument was that the settlement violated the "involuntary transfer" section of the Copyright Act prohibiting "expropriation" of copyrights by governmental bodies, officials or organizations.

But the most interesting of Amazon's arguments is that the Google Books settlement would result in price-fixing.

"[T]he Proposed Settlement’s vision for [a] “Pricing Algorithm” [is very risky] as Google is to design the formula 'to find the optimal such price for each Book and, accordingly, to maximize revenue for each Rightsholder.' The Proposed Settlement provides that the price of an individual book will be based 'upon aggregate data collected with respect to Books that are similar to such Book' and will be subject to change 'over time in response to sales data.' The clear implication of these provisions is that the algorithm . . . can optimize the price for a certain slice of books simply by increasing all prices of similar books at the same time—a high-tech form of the backroom agreements that are the stuff of antitrust nightmares."

(Page 19 of the Amazon filing, citations omitted, emphasis added.)

So the implication is that Amazon would take no advantage of data it might collect about the sales prices of books? Of Kindle titles? Amazon won't measure the effect that Kindle versions, perhaps at different price points, might have on paper book sales? Amazon's objection elsewhere states that Amazon is the friend of the consumer, working to keep down the prices of books: "Amazon currently negotiates with publishers for the price of book titles.  [Amazon] is able to drive prices down by playing one publisher off against another." (Page 30 of the Amazon filing, emphasis added.)

In Amazon's view, Google is the consumer's enemy and Amazon her friend; but Amazon is also willing to admit straight up that approval of the Google Books settlement would result in the loss of Amazon's primacy as an online bookseller:

"[T]he Proposed Settlement presents the imminent danger of installing Google as a monopolist through an arrangement that results in Google, and only Google, having access to a large percentage of the titles in existence. . . . And, over time, Google’s ability to offer and sell far more titles than Amazon and other booksellers will make Google’s website the destination of choice for persons desiring to view or purchase books over the Internet.  Google will certainly find a way to use that economic advantage to make consumers pay more."

(Pages 25 and 30 of the Amazon filing, emphasis added.)

The final sentence in that quote (not the language in bold, but the quiet sentence at the very end) might be a litmus test to be used in the future?

Owning Your Tweets: Twitter's Terms of Service, Part 2

Social media and the phenomenon of user generated content may be creating a new kind of ownership, one under which an author can control certain artistic and moral rights in her work, but not certain derivatives, and not information that is derived or aggregated from the work.

In the near term, key features of this new kind of ownership are ambiguous.

For example, the license users grant Twitter under Twitter's new Terms of Service is of no specified duration. Does that mean Twitter's rights in user content are perpetual, or revocable by the user?

In a blog post yesterday, Evan Brown argues that the lack of a specified duration may mean, under legal precedent, that the license is terminable at the will of the Twitterer. From this, he reasons that Twitter may be leaving its third party developers high and dry:

"What happens . . . [when] the individual user revokes the license to Twitter? [The] cached copies out there in the possession of third party developers all of a sudden become unauthorized, because Twitter no longer has the sublicensable right to allow the tweets’ copying and redistribution by others."

This cannot be what Twitter intends. Jeremy Freeland made the point in his comment yesterday to my earlier post on Twitter's Terms of Service:

"I'm assuming they'd prefer the license to be perpetual - if they're going to syndicate content, they need to be able to pass down rights to their sub-licensees after the relationship with the user has ended. But if you stop being a Twitter user, then since the terms of use would no longer apply, would the license grant end as well? Interesting ..."

Two months ago, TechCrunch in a series of posts published various internal Twitter documents, and in one of these posts, it published what it identified as notes from a Twitter management meeting held on June 9, 2009. One page of these notes speak to Twitter's possible objectives in publishing new Terms of Service.

These Twitter management meeting notes state that "we want full license to the content (including commercial use), with a few exceptions," and that Twitter would "throttle" the sublicensing of user content through more restrictive API license terms. Presuming the notes reflect company policy, isn't it fair to surmise that Twitter thinks, hopes or aims to have a broader license in user content than it means to give to third parties?

However, as a matter of public relations, Twitter cannot be seen to claim a perpetual license in the content of a user who has deleted her account.

For comparison, here's how Facebook handles the license duration question in its Terms:

"[Y]ou grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook ("IP License"). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it."

At first read, the statement that Facebook's license ends when you delete your account seems bold (and I imagine it is comforting to users concerned about control of their content). When you parse the complete sentence, though, you see that termination is conditional; and when you think about it for a second, you realize the condition is not one that is ever likely to be satisfied, at least not in the cases of active users. But maybe that's okay, maybe that just lets Facebook be Facebook for those who remain. (More significantly, though, Facebook's Terms define "IP content" narrowly, and arguably leave Facebook a "loophole" by regarding many user generated content issues as matters to be dealt with instead by Facebook's privacy policy.)

Back to Twitter: I think where we're headed is something akin to a license that is revocable as to Twitter, but perpetual as to the content (and its derivatives) Twitter has disseminated elsewhere during the term of its license.

Curating Your Content: Twitter's New Terms of Service

In a blog post earlier today, @biz announced Twitter's new Terms of Service. The revised Terms, he wrote, "more appropriately reflect the nature of Twitter and convey key issues such as ownership." Among other things, this means "your tweets belong to you, not to Twitter."

But what does that ownership look like, in practice?

Based on my reading of the new Terms of Service this evening, I'd suggest "ownership" of tweets may instead be something more akin to rights of attribution and identity, with perhaps some meaningful co-ownership that would permit one to own and control certain derivations and compilations of one's tweets that might take place outside of Twitter.

The Basic License You Grant to Twitter (to Let Twitter be Twitter)

We Twitterers know the tweets we post are published on the Twitter site, re-published on the iPhones of our followers via the third party apps they've chosen, displayed on giant screens at conferences, re-tweeted by others, compiled in search results, and used, modified, tracked, analyzed and re-purposed in ways that proliferate without end. All this actually seems to be the point, the very energy that is Twitter.

The new Twitter Terms of Service now account for the broad, open-ended dissemination of user generated content that actually occurs. The new Terms give Twitter permission to disseminate your tweets, in the following, industry-standard way:

"By submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed)."

Nothing remarkable so far (but I'll comment below on how the new Terms of Service go farther still). What was remarkable was how the previous Terms of Service did not begin to reflect the de facto bargain struck between Twitter and its users with respect to users' tweets. Those previous Terms stated in part:

"We claim no intellectual property rights over the material you provide to the Twitter service. Your profile and materials uploaded remain yours. You can remove your profile at any time by deleting your account. This will also remove any text and images you have stored in the system."

This stated an ideal that has proved to be impractical (and was there ever really any point in time where it was plausible to delete your account and suck your content back from the four winds where Twitter and your followers scattered it?).

The Additional Rights You Grant to Twitter (to Let Twitter Figure Out How to Monetize Twitter?)

As noted above, the basic license grant in Twitter's new Terms of Service reflects what is standard in the industry for publishers of user generated content. But the new Terms don't stop there. Here are three other pertinent paragraphs from the new Terms, which suggest that Twitter may want to allow for the possibility of commercially syndicating user generated content without sharing the associated revenue or otherwise paying the user:

"You agree that this license includes the right for Twitter to make such Content available to other companies, organizations or individuals who partner with Twitter for the syndication, broadcast, distribution or publication of such Content on other media and services, subject to our terms and conditions for such Content use.

"Such additional uses by Twitter, or other companies, organizations or individuals who partner with Twitter, may be made with no compensation paid to you with respect to the Content that you submit, post, transmit or otherwise make available through the Services.

"We may modify or adapt your Content in order to transmit, display or distribute it over computer networks and in various media and/or make changes to your Content as are necessary to conform and adapt that Content to any requirements or limitations of any networks, devices, services or media."

I don't see an express statement that Twitter may aggregate information inherent in user generated content, but, arguably, the last paragraph quoted above could be construed to permit that.

The Moral Rights of the Twitterer

As I stated above, ownership of tweets under the new Twitter Terms of Service may in fact be something more akin to rights of attribution and identity.

I surmise this based in part on the "Draft: Twitter Rules for API Use" currently posted. These state that "developers and companies building software that interacts with Twitter through our API" must observe the following four rules (abridged from the post linked to just above):

  • Identify the user that authored or provided the Tweet[.]
  • Maintain the integrity of Tweets and not edit or revise them....
  • Get each user's consent before sending Tweets or other messages on their behalf....
  • Get permission from the user that created the Tweet if you want to make their Tweet into a commercial good or product, like using a Tweet on a t-shirt or a poster or making a book based on someone’s Tweets.

These Rules for API Use seem to build upon the "Reposting others' content without attribution" rule that states it was posted late last year. Basic message: it is uncool to plagiarize.

Your Right to Create (Non-Tweeted) Derivative Works Based on Your Tweets

I do forsee that @biz's statement in his post that "your tweets belong to you, not to Twitter" has meaning with regard to what, in other media, we used to call "artistic" works.

For example, I think Twitter's new Terms of Service allow that a user could take the content she posts to Twitter and compile and modify that content and publish it as an epistolary novel. I don't believe the publication of that epistolary novel would negate Twitter's license to continue to syndicate the original tweets upon which the novel was based. But, in this hypothetical, the user would meaningfully "co-own" her own tweets, insofar as her right to create derivatives of those tweets would not be restricted by Twitter's rights in that same content. And this author of my hypothetical epistolary novel would have actual ownership of the derivative work; that is, she could control the dissemination of the epistolary novel itself, and Twitter would have no license or other rights in that new work (and probably could not re-assemble the underlying tweets to imitate that derivative work).

For a future post: what Disqus may mean in its Terms of Service where it states that "you can label your compilations with one of several possible licenses."

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