The most significant increase for typical copyright filers is in traditional paper applications (Form TX, VA, SR, GR). The Copyright Office has enacted a 44% increase in filing by paper — raising the fee from $45 to $65. Critics have intended that this unfairly penalizes copyright authors and owners without Internet access. The new Copyright Office fee structure took effect on August 1, 2009. A chart comparing the current and new copyright registration fees is here on the Arborlaw website.

Contact lists are a classic form of “confidential information” or trade secrets.  Trade secret law is one of the few areas of intellectual property law which is not governed by federal statutes:  trade secrets and confidential information are protected by state law.  This means that the law varies from state to state.  However, most states closely follow the definitions and principles of the Uniform Trade Secrets Act and the Restatement of Torts.  According to the Restatement, a trade secret

may consist of any formula, pattern, device, or compilation of information which is used in business and which gives [the business] an opportunity to obtain an advantage over competitors who do not know or use it.

Restatement of Torts 2nd, section 757.

Written agreements and NDA’s with employees typically cover contact lists and other confidential information
Most employers require their employees to sign a written confidentiality agreement or nondisclosure agreement (NDA).  These agreements require the employee not to disclose trade secrets and confidential information, and also not to use any confidential information in any manner except for the benefit of the employer.  This includes any use in a subsequent job.  Well-drafted NDA’s will continue to be in effect even after termination, to provide continuing protection by contract.  Employees taking email lists, electronic documents, photocopies of information, customer or supplier contacts, or pricing information will be potential targets for a lawsuit for breach of contract.   If an employer suffers lost profits, or the secret status of a valuable formula or strategy is made public and devalued, the employee could be liable for tens of thousands of dollars in damages.

State laws protect confidential information and trade secrets even where there is no written agreement
While the law favors the protection of confidential information and trade secrets by written agreement, most states protect this form of intellectual property against disclosure or use, even in the absence of a written agreement.  Employees frequently assume that the lack of a written agreement means that information is free to use.  Most states have statutes on the theft or misappropriation of trade secrets.  In most states, an employer must only show that (1) the information incorporates a trade secret; (2) the employer took reasonable steps to preserve the secrecy of the trade secret; and (3) the employee misappropriated the secret or used improper means, in breach of a confidential relationship, in order to bring a successful lawsuit against the employee.

Michigan trade secret law
A famous Michigan case illustrates the dangers of employees providing confidential information to third parties.  In 1999, a website operator named Robert Lane was sued by Ford Motor Company for posting confidential documents and photographs on a website.  The confidential information was provided to Lane by current and former employees, in violation of their employment confidentiality agreements. Was Lane himself an employee, or former employee?  No.  Had he signed a written agreement with Ford Motor Company regarding its confidential information?  No.  Nevertheless, the court held that Lane had probably violated the Michigan Trade Secrets Act.  See Ford Motor Company v. Lane, 67 F. Supp. 2d 745 (E.D. Mich. 1999), for details.

Not all information disclosed in confidence may be protected
Employers typically claim that any business-related information is “confidential information” or a trade secret.  The law does not reach that far.  Information which will not be protected, even if spelled out in a written agreement, includes information which:

• enters the public domain through no wrongful act of the employee
• is received by the employee from a third party without similar restrictions regarding non-disclosure
• is furnished to a third party by the employer, without similar restrictions regarding non-disclosure
• is approved for release by written authorization of the employer
• was possessed by the employee prior to the effective date of employment, or a written agreement
• is developed by the employee independently of confidential information received during the employment relationship

Attempts by the employer to protect this information will typically fail.   Written contract terms which do not exclude these common law exemptions from coverage are against public policy and are typically not enforced by courts.

Confidential information must be maintained “confidential” to qualify for protection
The most common mistake made by employers is to require all employees to sign a confidentiality agreement or NDA, but then fail to exercise the ordinary care required to maintain the “secret” status.  Publishing “confidential information.”  The best way to meet the requirement to preserve confidentiality, is to require a written agreement with every party coming into contact with the protected information.  Allowing one employee to take a contact list to a subsequent employer will result in a loss of protected status for that information.

The cat’s out of the bag?  There still may be liability
Keeping this legal framework in mind, it might seem like a trivial exercise to avoid liability:  merely make the information public, and then it’s no longer protected under the law.  While public disclosure may result in a loss of trade secret status under the law of many states, the law may still be enforced against the wrongful discloser — and in many cases, even against a third party, where the party had reason to know that the information was considered to be a trade secret.

Written NDA’s and Confidentiality Agreements make responsibilities clear
The basic function of a contract is to clearly set out the ground rules for a commercial relationship in order to avoid costly legal disputes that might arise from different interpretations of the law.  In the confidential information and trade secret arena, there are fifty states, so there are fifty different laws, and as many or more interpretations.  Given the patchwork nature of the common-law and statutory framework in protecting business information, while employers without written agreements may ultimately be able to enforce their intellectual property rights against employees in the absence of a written agreement, it’s foolish not to have one.

Resources

• The Citizen Media Law Project:  Misappropriation of Trade Secrets
• The Citizen Media Law Project:  State Law — Trade Secrets
• Michigan Uniform Trade Secrets Act

2009-PA-0029 (House Bill No. 4453) [PDF]
2009-PA-0030 (House Bill No. 4454) [PDF]
2009-PA-0031 (House Bill No. 4455) [PDF]

“At will” employment is the rule, not the exception
In most cases, an employment agreement is going to be what we call an “at will” agreement: the employee is employed at the will of the employer — and can be let go at any time, at the will of the employer. What if there’s a written agreement, but it doesn’t specify whether employment is “at will”? If the employment agreement doesn’t specify that an employee can only be terminated “for cause,” then the employment agreement is “at will.” At will employment is the default in most states (Michigan included).

Some written employment agreements specify that an employee may only be terminated for cause. Barring special circumstances (such as employment under a union or other associational agreement), termination “for cause” must be spelled out in writing in the terms and conditions of the employment agreement. The employment agreement should have a termination section that indicates when an employee can be terminated “for cause,” and it should contain a definition of the causes that justify termination within the agreement. (Note to employers: acts justifying termination for cause should be clearly spelled out. This benefits the employer as well as the employee, and avoids having a court modify the employment agreement in a legal dispute.)

Employment agreements which can only be terminated for cause are frequently used in a wide variety of industries and situations. For cause agreements are used for key employees in technology companies, founders and managers in startup ventures, professionals in finance and accounting, doctors and lawyers, and employees in unionized businesses and companies. For cause employment contracts are typical where the employee has more leverage than an ordinary worker and cannot easily be replaced.

There’s no employment contract
There is always a contract between a worker and a hiring party — even if there’s no written agreement. In the absence of a written contract, employment is always “at will”: the employee can be let go immediately. Unless, of course, the employee isn’t really an employee — many business owners are shocked to find out that in the eyes of the IRS and/or the state department of labor, their ‘contractors’ are really employees, or vice versa. If you’re the employer in this situation, ‘misclassification’ of an employee as a contractor is a very expensive mistake.

“Two weeks’ notice”
Many people believe that a company or employee owes the other party “two weeks’ notice” for terminating the work relationship. That’s not a legal rule, it’s a conventional practice. “At will” employees can be escorted off the premises immediately upon notice of termination, with an arrangement to pick up their belongings at a later time. While this can come as a shock to the employee, it’s something that attorneys routinely recommend to employers as a standard employment policy, for security reasons.

If you’re unemployed or looking to re-educate and change careers, you can identify training opportunities for green jobs by county or region.

If you have a business, the No Worker Left Behind program will assist you in moving into green industries — by providing consulting and employee training resources to facilitate the development of employee skills and expertise for green jobs within your company. Here’s a resource page containing links to several local and regional green initiatives. There’s a mailing list to receive information about green jobs in Michigan here.

What’s good for the goose, is apparently not good for the Michigander.
Apparently the Administration believes that this may be the only course to save the auto industry over the long run, but is the cost worth it? The message being sent here is very dangerous: if you are down in the trenches trying to create long-term productivity, you are last on the list of Washington priorities. But, according to the Wall Street Journal, if you are Citibank CEO Vikram Pandit, taking hundreds of billions of taxpayer dollars because of dodgy financial practices, you are incapable of being replaced:

Citigroup Inc., by contrast, has received three government rescues since October, under which the U.S. will own up to 36% of the company’s stock. Officials have in the past considered removing CEO Vikram Pandit, but demurred, in part because of the paucity of candidates to replace him, people familiar with the matter say. A spokesman for Citigroup couldn’t be immediately reached for comment.

It’s just not that simple. Contracts are a set of rules that spell out the parties’ mutual intentions and individual obligations for a jointly-agreed undertaking. Good contracts not only spell out the structure and the rules, they spell them out taking into account a wide variety of alternate realities — not just what everyone had in mind when they first started to negotiate and everything was kumbayah — but also how things should go under…weird circumstances. Wierd circumstances like floods, fires, earthquakes, strikes, martial law, and the US government taking over your company due to a collapse of the financial system.

Suppose you and I make a contract for me to tap-dance on your coffin on the date of your funeral, and in exchange I will receive a $1M dollar “retention bonus” (for sticking around until you are actually dead). You fulfill one of your obligations under the contract by showing up (dead), thereby providing me the necessary coffin to tap-dance upon. (And I made sure that you pre-arranged payment to me via a third party, since you wouldn’t be there to hand me my bonus check.) Just before I am about to start my tap-dance routine, the law of gravity is rescinded, causing me to fly off the earth, and causing your coffin to fly off the earth, too. I couldn’t tap-dance on your coffin, as I contracted, if I wanted to. Weird circumstances.

In writing good contracts, good contract lawyers actually spend a fair amount of time thinking along these “What are all the bad things that could go wrong?” lines. US commercial law has a doctrine for dealing with weird circumstances called “force majeure.” A force majeure term in a contract excuses either or both parties from their obligations under an agreement, because it is no longer possible to perform as promised due to circumstances beyond the parties’ control. (The great majority of professionally negotiated contracts contain a force majeure clause.)

My response to Mr. Sorkin’s argument in favor of paying the AIG rockstars used force majeure as an example of one of the many ways that a contract could be interpreted to excuse non-performance. I stated that AIG was extremely likely to be able to be excused from paying the bonuses due to the collapse of the financial system, and without breach under the actual terms of the contract — IF there were a force majeure clause in the contract to rely on. Here’s the link to my AIG bonuses / force majeure comment on the New York Times (and here’s a permalink to the comment text which I have placed here on the Arborlaw site.)

But, we don’t have to stop at force majeure, the issue which I chose. There are at least a dozen more legal theories that would support withholding those AIG bonuses. The New York Times has a pretty nice roundup of the main legal theories here: “Room for Debate: When Bonus Contracts Can Be Broken,” The New York Times (March 17, 2009), and Lawrence Cunningham makes an excellent and concise summary of the basic legal principles in an op-ed comment here: “A.I.G.’s Bonus Blackmail,” The New York Times (March 18, 2009).

Score another one for the contract attorneys (maybe).

Just a few days later, Amazon changed course, announcing that it will allow authors and publishers to decide on a book-by-book basis whether or not to allow text-to-speech functionality.

Apart from making nice and preserving existing business relationships (always good reasons), why would Amazon capitulate?

Contracts, baby, contracts.
As it turns out, the contract language in a few of the existing publishing agreements with Kindle 2 authors was worded broadly enough to cover text-to-speech rights (which meant that Amazon, in relying on the publishers’ ability to pass through the necessary rights to publish on the Kindle 2, was fine). But the majority of the publishers’ agreements with their authors did not contain terms which granted the necessary rights to the publisher, which means that the publisher did not have those rights to pass through to Aamzon. (Further, the majority of those contracts probably contain typical general-purpose copyright agreement language that states that all rights not specifically granted are reserved to the authors. If you are an author doing a book deal, those are magic words). According to the Wall Street Journal update on the Kindle 2 copyright controversy, Paul Aiken, Executive Director of the Authors Guild

said that several major publishers discovered that the contracts they had with authors didn’t give them the right to sell e-books with audio functionality. “It’s possible that the majority of the titles Amazon sells via the Kindle fell into this domain,” he said. Agents, authors and publishers will now have to review contracts and strike new licensing agreements. “It will be a process of amending tens of thousands of book contracts to include text-to-speech rights.”

What’s good about this outcome?
Contracts are good. Contracts are intended to resolve uncertainty. Neither Amazon nor the Author’s Guild will be spending their time and money using the US Federal court system to resolve whether text-to-speech is “fair use” exempted from copyright licensing requirements, or is a “public performance” falling under a copyright owner’s exclusive rights under Section 106 of the US Copyright Act. Those are interesting legal questions, but it’s a far better use of resources for Amazon and the Author’s Guild to jointly spend their money promoting the Kindle 2 and the available titles, and building the e-book market. Going forward, publishers are going to provide for the resolution of this issue in every publishing agreement with every author that they make, and authors and their agents are going to negotiate new book deals with these rights in mind.

Score one for the contract lawyers.

In 2008 both Nevada and Massachusetts passed data privacy laws requiring encryption of personal data. The Nevada law requires all businesses to encrypt personally-identifiable customer data that are transmitted electronically. The Massachusetts law requires encryption of personal information on laptops and portable devices. Both states’ laws apply not only to resident businesses, but also to out-of-state companies with operations or customers in those states. Any company doing business in all 50 states will have to comply with these data encryption requirements.

For purposes of both laws, the personal information affected by the data privacy encryption law includes an individual’s name, plus one of the following: driver’s license, credit card information, or social security number (SSN).

Both laws establish liability standards for failing to encrypt personal information as required. The Nevada law allows companies complying with the encryption requirements to benefit from a $1,000 per individual cap on liability, which are otherwise unlimited under a lawsuit for negligence. Links:

Text of Nevada data privacy security and encryption law (NRS 597.970)

Text of Massachusetts data privacy security and encryption law (201 CMR 17.00: Standards for The Protection of Personal Information of Residents of the Commonwealth)

Michigan and Washington are among states currently considering similar laws.