Today I was interviewed by a Senior Writer at the Chronicle of Higher Education about my research into Specialization in the Law School curriculum. I did a major project on that back in 2003 and nothing like it has been done since. You can find out about that over at my Wooden Pencil, Inc. site. The were also interested in the data I’ve gathered in the last 3 National Prospective Law Student Studies. It should be a nice article.
Play Nice: Legal Issues & Social Media
You already know, or are learning, that social media tools like Facebook, Twitter and LinkedIn are wonderful ways to keep in touch with your friends and business associates. However, unthinking posts in such forums could land you on the wrong side of a lawsuit.
My goal here is plant a few seeds in the back of your mind about social media content you create. I won’t be able to cover every possible way you can get yourself in trouble, but I’ll hit the highlights.
Of course, each situation is unique to you, your state, the people on the other side of any discussion, and a bunch of other factors, so don’t simply take my word for it. If you find yourself in trouble, consult your own attorney — everybody should own one.
The most probable ways you can find yourself in hot water are:
Defamation: damaging someone’s reputation.
Privacy: disclosing someone else’s secrets.
Interference with Business Relations.
Negligence: being a dork and harming someone.
Contract: ending up in an enforceable agreement.
Trademark: confusing consumers about a brand.
Copyright: sharing something that’s not yours.
Defamation
In today’s world, we lump harms to someone’s reputation arising from a written statement (libel) or from a spoken statement (slander) under the common term “defamation.” Here’s what we look for:
1. Defamatory language on the part of the person being accused, which could be you or someone else online. Note that the language does not have to be direct, it can also be innuendo, satire, etc.
2. That language must be “of or concerning” the person claiming to be harmed by the language.
3. The language must be “published,” which is just assumed in the context of our discussion of a troubling tweet or other social media content.
4. The language has to damage the reputation of the person making the complaint. Note that even a statement of opinion might be trouble, for instance: “I don’t think Sylvia can be trusted with the key to the store” would be actionable because you’re implying a personal knowledge and accusation of dishonesty that would harm Sylvia’s reputation.
If the language refers to a “public figure” or involves a “matter of public concern,” then we have to also prove:
1. Falsity of the language; and
2. Fault on the part of the accused person.
Remember that you can get in trouble with statements that target an individual, company, association, or anyone that has a reputation to be damaged. And, it could cost you big-time, especially if you are referring to a few special cases such as a statement that goes to a business or professional reputation, says someone has a “loathsome disease,” has committed a “crime involving moral turpitude,” or imputes “unchaste behavior to a woman.”
Even a truthful statement can get you into trouble if sharing that bit of truth damages someone’s reputation.
Privacy
This one is touchy. If you disclose something that a “reasonable person” would not want disclosed, then you could wind up in trouble, even if the disclosures are truthful. An example would be disclosing the real name and location of someone in witness protection. Another example would be attributing to someone views he doesn’t hold, or saying someone did something they did not do. Exposing someone’s extramarital activities inadvertently by posting a photo showing person X with date Y when the date is not X’s spouse could land you in hot water.
Note that this right is personal. Companies cannot claim a right of privacy, although they have other avenues to pursue similar situations, such as “Intentional Misrepresentation,” otherwise known as “fraud” or “deceit.”
Interference with a Business Relationship
This one is pretty well explained by the title. To get in trouble here you have to know about a valid contractual relationship, or a valid expectation that someone will be entering a valid relationship, then you have to intentionally mess it up. Enough said.
Negligence
Think about a car accident. Now think about a car accident online and you’ll be heading down the road to understanding this potential problem.
When you drive a car, you have a duty to conform to a specific standard of conduct, which was breached in the accident and caused actual damage to someone. The same can happen online. Do you have some duty of care?
A good example would be an attorney or doctor who has a duty to keep client information confidential. You also signed, but probably didn’t read, a “terms of use” agreement for each social media site when you signed up. Those agreements generally define your duty relative to the content you post on the site.
Did you breach that duty? And, did your breach cause damage? All four elements have to be in place to get you in trouble for negligence.
Contract
All it takes to fall into a contract is an offer, an acceptance, and a promise to pay, known as “consideration.” That’s it.
You might think you’re joking around during an online exchange, but just a single post and response could bind you into some contractual action. Watch out that you don’t agree to something you really don’t want just because you don’t think social media exchanges count as contractual language.
Heck, you could also get in trouble here by making an offer for business services that are seen as an open offer for everyone. The possibilities are endless.
Trademark
Trademark law is all about protecting someone’s investment in their brand — personal or business. It’s about consumer confusion.
The test for trademark infringement is if an appreciable number of consumers would be confused about the source of some goods or services, thinking those goods or services come from, are affiliated with, or endorsed or sponsored by the person making the complaint. The affiliation and endorsement factors will get you in trouble.
So, don’t use someone else’s brand name for your online name, and avoid inferring that you are associated with people or brands with which you really have no affiliation or sponsorship.
Copyright
I admit it will be hard to get yourself into a copyright infringement situation from a single 140-character tweet, but you might be tempted to post a few tweets in a row to share a short poem or song lyrics. Don’t do that.
It’s easier to get in trouble on Facebook, LinkedIn, or MySpace because there you might be tempted to post a photo or piece of music that will land you squarely in a copyright infringement situation. Just because it’s online and easily copied, doesn’t mean you have the right to make and post other people’s creative work. You don’t.
Trust your instincts — if you had worked hard to create something, would you want it posted by someone else? Probably not.
I’m sure there is some form of legal trouble that you could get yourself into that goes beyond this list. But I’m going to assume that you’re not a criminal mastermind and that you’re not going to use your online accounts to harass people or solicit young boys or girls to meet you at the mall for a date.
Use your account only for good, to make friends and help people. It’s a jungle out there, so be careful and play nice.
Troubling Tweets
I just got another call about a potentially “troubling tweet.” A Troubling Tweet is a potentially damaging post using Twitter (www.twitter.com) that could get the person posting the “Tweet” in legal trouble. Most of the time, these things happen relative to damaging personal or business reputation, trademark issues, contract issues, and some other causes of action.
This is the second separate matter regarding Twitter Tweets that I’ve dealt with in the last two weeks and when that happens, I know it’s going to escalate.
Watch for an article on this topic coming out in the 12/19 issue of the Northern Colorado Business Report. I’ll post the article to this site on that day as well.
When in doubt, don’t post and play nice. 🙂
Personal purpose statement:
“My purpose is to help as many people as I can reach as much of THEIR potential as THEY can.”
Northern Colorado Business Report – Column 2
NCBR ARTICLE
When it’s time to turn the car around
By Kevin E. Houchin, Esq.
September 26, 2008 —
Imagine this. You’re two years into owning part of a startup. You’ve invested dozens of hours with your co-founders planning. You’ve invested dozens of nights and weekends away from your family fueling growth. Now things are rolling and it’s obviously time to take things to the next level.
Unfortunately, some of your partners don’t agree. Tension is high. Tempers are flaring. As you’re driving home from another 14-hour day, you wonder what it would cost to just keep on driving.
Can you afford to say, “It’s been good, but I’m leaving to pursue success on my own terms”?
We’ve all asked the question, “What will it cost to leave?” We asked it in our very first job, and we should keep asking in every position we ever hold. Asking the question shows we are still willing and able to grow.
The key to our successful growth is being able to accurately answer the question, but many business owners fail to plan for this eventuality. There will always come a day when you really want to just keep driving and never go back. What will that cost?
Answering this question may be the most important element of business planning. It takes work to write a solid business plan with all the conventional elements of market, management and financial forecasting, but those discussions are relatively easy compared to “What will it cost to keep driving?”
Discussing what happens when someone wants out is charged with emotion, including the fear of failure that nobody wants to bring to the planning table. Avoiding the question can cost huge money when the relationship is strained, so you need to have a plan in the event someone wants out before the multi-million dollar liquidity event materializes.
So, how do you agree on that plan? I’ve helped many startup teams work through the process in three easy steps.
Step 1: Framing the discussion positively
Nobody likes discussing bad scenarios. Fortunately, many good scenarios can frame discussions about what happens if someone wants out. What if someone gets an opportunity to spend two years surfing in New Zealand? What if someone decides to retire early? What if someone gets a chance to move on to a different startup? All these are wonderfully non-threatening stories that you can use to frame your discussion.
Once you’re talking about someone leaving for a reason you all can understand (or even envy), then discussions will go more smoothly, because we can all put ourselves in the position of wanting to move on for something better. At that point we all understand how the other people feel – without anxiety, fear, or blame.
Step 2: Incentive to turn the car around
Now that the topic is framed in a non-threatening, happy story, it’s time to get down to details. Most of the time you have gone into business with other people because they add something to the mix, and losing that person would mean losing a key element of the company’s success plan.
So, you want to give people a good reason to stay. You want to give everyone incentive to turn the car around and come back to work the next day and to work out any differences. That means you’ll want to give a fair, but relatively low, valuation for ownership interest, and you’ll want the company to have the option to pay in one lump sum, or over time.
Valuation of the company is the key. As an owner, you’ll know the financial situation. As a ticked-off owner, you’ll overvalue your contribution to the success of the venture. Without a previously established valuation, or formula to establish valuation, you can’t accurately answer what it will cost to keep driving, and you will very probably underestimate the cost and overestimate the benefit of leaving.
If you decide to go, you and the other owners of the company will likely spend thousands of dollars, maybe even tens or hundreds of thousands of dollars, in legal and accounting fees trying to figure out what your share is worth. That’s incredibly wasteful and easily avoided.
There are numerous ways to value the company, and it’s important to understand that there is no “right” way. The most important thing is that all the owners agree in writing to whatever valuation approach you’ll use.
With brand new startups, I like to use the book value of the company because it’s easy to calculate, objectively measured, fair, and it undervalues each founder’s contribution to the company equally by not accounting for any “goodwill.”
In a new startup, goodwill hasn’t really been established, so the undervaluation acts as an incentive to turn the car around, because if you kept driving you would be leaving what feels like a lot of value on the table. This left-behind value acts as a great incentive to keep key partners in the company instead of taking that surfing sabbatical in New Zealand.
You’ll want to examine the valuation method every year, and after a few years consider adding some amount of goodwill into the formula, but keep it very conservative. Finally, note that if someone is pushing for higher valuation, they just might be thinking of jumping ship.
The second element of this arrangement is giving the company and other owners the option to make the payout in a payment, or over time. Obviously, if someone wants out, it’s best to get them out as cleanly and quickly as possible. Sometimes there isn’t enough cash available from the company or other owners to make a quick buyout, and the buyout has to be completed over time.
I advise giving the company and owners the option to pay 20 percent of the buyout initially, then 20 percent each year over the subsequent four years with a reasonable rate of interest.
This combination of low valuation and extended payment timeline is another powerful incentive to keep essential people in the company.
Step 3: Clear documentation
Just as a good business plan needs to be documented, so does your “what’s it going to cost me” agreement, otherwise known as a “buy-sell” or shareholder agreement. Every owner needs to sign off on the same deal.
When you work with your attorney to craft this document, you will also take into consideration what happens if someone is hurt and can’t work, gets divorced, dies, or does something that requires someone to be expelled from the ownership group. Usually, these factors can be discussed quickly and any uncomfortable feelings these topics generate can be blamed on the lawyer, because you’ll all have agreed to valuation and payout options.
Business planning is a lot of fun. Building a company is a lot of fun. Working with your friends is a lot of fun. Succeed, but plan on the day (and I guarantee it will come) when one of you asks, “What will it cost me to keep driving?” Have an answer ready.
Kevin Houchin is an attorney specializing in business development, intellectual property and marketing for entrepreneurs based in Fort Collins. He will be covering the legal world for the Business Report each quarter, and can be reached at kevin.houchin@houchinlaw.com.