This section of the tutorial will review a subset of contracts that an online startup may require in order to launch. This is not an exhaustive list but rather representative of contracts that are often required.
In short, the Internet Lawyer you select to help guide your online startup should be prepared not only to draft electronic contracts in a manner that provides maximum protection, they must be prepared to discuss the underlying processes required to substantively underpin the contracts.
Many online startups will leverage advertising as a critical component of their monetization strategy. It is important to have the appropriate agreements in place with advertisers. An agreement with an advertiser will contain a number of required clauses, depending on the specifics of the arrangement between the parties, including definitions of widely used industry terms such as "CPM," "CPI," and "CPA" (i.e. so as to eliminate ambiguity); implementation and operations of advertisements including effective dates; right to refuse certain kinds of advertisements (if applicable); payments and refunds; renewal clauses; truth in advertising; etc.
Furthermore, the contract between a website owner and an advertiser should contain the necessary disclaimers including the fact that the website owner does not (and cannot) guarantee results based on advertisements. In addition, sensitive business information may be shared with the advertiser (e.g. traffic metrics and advertising rates) which the website owner wants to maintain as confidential. Therefore, the requisite confidentiality clauses must be expressly provided for and the necessary process steps taken.
Finally, as with all electronic contracts, the appropriate governing law, forum selection, and arbitration clauses must be incorporated. Although these clauses are often "negotiated" with advertisers, the website owner may be in a position to dictate these terms depending on the strength of the website's traffic.
First of all we need to answer the question: "what is affiliate marketing?" As the previous link suggests, affiliate marketing is a subset of online marketing wherein a website drives traffic to another website in exchange for some form of compensation. Many of the Top 500 online retailers have implemented successful affiliate programs and there are few barriers to entry for online entrepreneurs that want to do the same. That said, you will want to pay attention to emerging legal issues that threaten to dampen the enthusiasm that has fueled affiliate marketing.
If you decide to launch an affiliate program you will likely want to have an electronic contract in place that makes it easy for prospective affiliates to join your program. This strategy allows your affiliate program to scale and reduces the administrative burden of contract management. So what are the terms and conditions that your affiliate contract should contain? The specific answer to this question will depend largely on the type of business you are in, but in general your affiliate contract will want to specify:
The list of terms and conditions enumerated above are obviously not exhaustive. They simply reflect the kinds of issues you will want to think through, most likely with the advice of counsel.
Professional Services Contract
There are any number of professional services contracts that many online startups may engage in, but one in particular is almost universal in nature. Which one? The "website design and development" contract that you engage in with the third party that builds your website.
Obviously this assumes that you are not a technology startup, in which case you are likely building your own website. However, it does assume that your website is mission critical to your business and that it provides content that is unique and/or novel in order to attract potential customers. In short, your website is likely to be much more than a "business card website" and will require significant investment of capital (i.e. relative to your overall startup budget).
What are the legal issues to look out for? They are numerous and will partly depend on the type of website being built (i.e. the complexity of the code and content that underpins it). Here are some legal issues that almost always apply:
The issues described above are not exhaustive, but rather illustrative of the kinds of issues you can expect in a website design and development contract. Unless you are experienced in these matters then it is recommended that you seek advice of counsel before proceeding.
It is quite possible that an online startup, depending on the business model, could engage in any number of professional services contracts. It is important that the Internet Lawyer you select as counsel have a fundamental understanding of the intersection of legal, business and technology issues that are presented.
Intellectual Property Licenses
An owner of intellectual property ("IP") is entitled to exploit its IP rights for profit or other consideration. The owner ("licensor") may contract with third parties ("licensees") allowing these parties to use the IP as constrained by the terms and conditions of the agreement. Both the licensor and the licensees get something of value that they would not have gotten but for the license. Having the proper license also means that you have the legal permission to use the owner's IP.
For example, you cannot simply "borrow" photographs available on the Internet for use on your website. Photographs are copyrightable subject matter and the wrongful use of a photograph is infringement of the owner's copyright. However, if you need stock photos for your website there are a number of sites, including iStockphoto, where you can license the rights to use photos for far less than it would cost you to produce them yourself or for you to hire someone else to produce.
Non-Disclosure Agreement (NDA)
A non-disclosure agreement ("NDA") is a contract between two parties wherein one or both parties want to share information (on the one hand) but otherwise want to maintain said information in a manner that restricts it from being made available to the public. An NDA outlines the material, knowledge, or information that the parties want to share with one another confidentially. An NDA creates a contractual relationship between the parties to protect the information defined in the agreement and/or trade secrets.
Online entrepreneurs are well advised to make liberal use of NDAs, especially when working on early stages of the venture. Ideas, standing alone, cannot be protected under intellectual property doctrine and, therefore, one of the best ways to protect a great idea (i.e. one that you need to share) is with an NDA. An NDA is a standard business device used to protect ideas and other confidential information. You should not hesitate to leverage one.
There are a number of key terms and conditions that are almost always present in most employment agreements, including the following:
Online startups will definitely want to have employment contracts with key employees. As discussed throughout this tutorial, there are any number of niche markets in the long tail that could prove to be quite profitable. Succeeding in the long tail will require a combination of technical and domain knowledge applied in ways intended to disrupt the status quo.
Given that online startups are generally monetized through intellectual property in some way, shape or form, it is important to have employment contracts with almost all early employees in a startup. Why? Because nearly all of them are likely to be key employees in the sense that they are likely to contribute significantly to how the niche is monetized, as the business model develops. In short, they are the ones that going to have knowledge of the secret sauce.
It is important that employment agreements be signed at or near the time that employment commences or is renewed, otherwise the agreement may not contain the necessary quiid-pro-quo (the necessary "consideration" in legal terms) to be enforceable.
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