If your company sells products or services online, the purchase process almost certainly includes a click through agreement, also known as “clickwrap,” “web-wrap,” or “click and accept” agreements. This refers to the button the consumer must click to indicate they accept all of the terms of the sale. If they choose not to accept, the sale will not go through. This agreement often includes intellectual property protections for the company, license restrictions, liability limitations, disclaimers involving warranties, among other standard contract terms.

The large majority of online consumers often click through without carefully reading the terms of the agreement. If a consumer later contests a term in the click through agreement, will a court uphold and enforce the terms of the initial agreement? This is important to know, as an unenforceable agreement can result in liability and losses. Consulting with an e-commerce attorney is the best way to guarantee a legally binding contract.

Fotolia_126870887_Subscription_Monthly_M-300x215
Court Ruling on “Shrinkwrap Agreements”

One of the primary benefits of incorporating your business and complying with corporate governance laws is that a corporation provides personal liability protections for its owners from the debts and liabilities of the corporation. These protections exist because a corporation is viewed as an entity that exists separate from its owners and this creates a “corporate veil” which is intended to protect the shareholders from personal liability. However, there are some circumstances in which an injured party may hold shareholders personally responsible for the debts or actions of the corporation. This is commonly referred to as either “alter ego liability” or “piercing the corporate veil.”

Fotolia_81873753_Subscription_Monthly_M-300x199
Generally speaking, when a party sues a corporation, that party seeks money from the corporation and not from shareholders as individuals. In some situations, however, owners may simply be using a corporation as an “alter ego” for themselves and they do not actually treat the corporation as a separate legal entity. In such cases, a party suing the corporation may pierce the corporate veil and try to hold the owners personally liable as well. While successful alter ego liability is rare, it does occur and all corporate owners should take steps to avoid it whenever possible.

Signs of “Alter Ego” Corporations

In the early stages of a merger and acquisition (M&A) transaction, owners may be willing to overlook certain differences in favor of focusing on the benefits of the deal. However, as the M&A transaction is completed, the rose-colored glasses may come off and sudden concerns may develop into serious legal disputes between owners. If these disputes are not handled correctly, it can result in long-term consequences, both financially and regarding the relations of the parties. The following are some information regarding common post-closing M&A disputes.

Fotolia_63542719_Subscription_Monthly_M-300x300
Deferred Payment of Purchase Price

Many M&A agreements are structured such that part of the purchase price is paid at closing and the rest is paid at some point in future.  This is done with “earn-out” clauses and purchase price adjustment clauses, among others.  An earn-out clause is where the amount of future money paid depends on selling company’s performance after the acquisition, i.e. the money has to be earned after the closing before it is paid out.  These types of clauses are sometimes interpreted differently by buyers and sellers after the closing.  For example, if the selling company’s product is upgraded after the closing, the buyer and seller may view the revenues from those sales differently under an earn-out clause.  As another example, if the buyer and seller have different accounting practices that could certainly affect their interpretation of purchase price adjustment clauses.  Resolving these disputes can involve complex accounting and negotiations by both parties.

The last thing a business wants is the unexpected surprise of having to pay back money it has received from a customer for goods or services. Although charge-backs and payment disputes may be more common in today’s digital world, a startup or business will likely be caught off guard when it is served with a “preference action” filed by a bankruptcy trustee or bankrupt customer.

The Bankruptcy Code permits the trustee to avoid and recover from creditors for the benefit of all creditors of the debtor’s bankruptcy estate certain pre-petition transfers made within 90 days (and sometimes longer) of the debtor’s bankruptcy filing that would otherwise benefit one creditor at the expense of others. Such transfers are referred to as “preferences.”  Simply put, a preference is where a trustee can recapture certain payments made by the debtor prior to its bankruptcy filing.

Fotolia_126409196_Subscription_Monthly_M-300x192
The avoidance and recovery of a preference payment helps to ensure equal distribution among the debtor’s creditors and is intended to discourage aggressive collection tactics by creditors that force the debtor into bankruptcy. An adversary proceeding (a lawsuit filed in the debtor’s bankruptcy) is required to avoid and recover a preference, but a preference action is often preceded by a demand letter from the trustee setting forth the trustee’s claims and demanding immediate repayment of the preference payment.

The purchase and sale of goods and services at a storefront is rarer these days. Information technologies make online transactions more efficient and convenient. However, those same transactions expose businesses to greater risk and liability when receiving and using customer information. Information technology companies must not only must safeguard their electronic transactions, but also secure sensitive information and proactively combat data breaches. Failure to do so can lead to a huge economic loss for the customers and the company.  Structure Law Group, LLP advises companies engaged in e-commerce on privacy and security issues, how to safeguard against the inadvertent data breaches and counsels them on the necessary steps to take if such an unfortunate event occurs.

Protection of Personal InformationFotolia_125589788_Subscription_Monthly_M-300x200

California law protects the individual’s right to the safety and integrity of his/her personal information. California’s Information Security Act defines personal information as any information that could identify or describe a person. Personal information includes a person’s name, address, social security number, license number, medical information, and the like. If your website collects such information, then you are required by law to take reasonable steps to prevent disclosure of such personal and private information. California law obligates businesses to implement security measures reasonably designed to protect the integrity of the such information. Every business entity, from a sole proprietorship to a multi-national corporation is subject to the Information Security Act.

There are many different types of businesses in which you can invest and earn profits, many of which that involve real estate. One important investment opportunity is a real estate investment trust, or REIT. This type of investment was created by Congress to give stockholders the opportunity to reap benefits from income-producing real property without having to go through the entire process of purchasing the property. There are different types of REITs and also many regulatory requirements for this potentially lucrative business endeavor.

Types of REITsFotolia_91167303_Subscription_Monthly_M-300x196

There are three main types of Real Estate Investment Trusts and the following is a brief description of each:

Many people will say that your business is only as good as your best employees. In fact, you may have one or more top employees who are absolutely integral in building and maintaining the success of your company. While having talented employees is a benefit to any business owner, it also tends to draw the attention of your competitors.

Identify the most important employees.Fotolia_121891165_Subscription_Monthly_M-300x221

Your company may have some employees who could leave with only minimal interruptions to your business operations. On the other hand, there may be a select few whose absence may substantially harm your bottom line. Identify the top performers in your company through performance reviews and other tools and focus on keeping them satisfied. After all, your competitors will not be actively seeking your “benchwarmer” employees – they will be looking to take your Stephen Curry.

Businesses are moving away from the traditional storefront and are instead setting up shop online. Both the internet and apps connect individuals across the globe, providing businesses with greater and more innovative ways to reach new customers. For example, on Black Friday 2016, the busiest shopping day of the year for most retailers, online sales rose 21% year-over-year for a total of $3.34 billion. A full one-third of that figure was just from mobile sales.  On Cyber Monday 2016, the largest online shopping day, online sales rose over $3 billion with 26% of sales just from mobile devices.

shopping_s-300x300
As a greater number of businesses devote their focus to the development of an online presence and using e-commerce to conduct their business, businesses must pay more attention to properly establishing and operating their online business.

Starting Your Business

Applying for a patent can be complex and time-consuming. People who aren’t familiar with the process can run into hurdles that lead to delays and higher costs.

If you’re thinking about applying for a patent, here are a few important questions to consider. Keep in mind, this is a high-level overview and shouldn’t be construed as legal advice.  If you are looking for advice, please call us at 408-441-7500 today.

Fotolia_97178064_Subscription_Monthly_M-300x206
Does my product or idea qualify for a patent?

What happens to an LLC member’s membership interest in the LLC if the member files bankruptcy? How does the member’s (the debtor) bankruptcy filing impact the LLC and its other members? Does the bankruptcy trustee (or the debtor in possession in a chapter 11) step into the debtor’s shoes contrary to an express provision in the LLC’s operating agreement restricting transfers by members and prohibiting a transferee or assignee of a member from becoming an LLC member without the other members’ consent? Is the bankruptcy trustee bound by the terms of the LLC’s operating agreement, or does the trustee acquire the debtor’s membership interest free and clear of any transfer or other restrictions imposed by the LLC’s operating agreement? To answer these questions, the Bankruptcy Court in the debtor’s bankruptcy must first determine whether the LLC’s operating agreement is an “executory” contract under Section 365 of the Bankruptcy Code.

contract-300x200
What is an Executory Contract?


The Bankruptcy Code does not define “executory contract.” However, many circuits, including the Ninth, have adopted the “Countryman Test,” which provides that a contract is executory if ‘the obligations of both parties are so far unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other.’ Determining whether a contract, including an operating agreement, is executory therefore requires a case-specific examination of the contract in question.