I will be in my South Florida office from January 30 – February 3.  If you would like to set up a meeting, please let me know.

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This week’s blog is a reprint of an article I wrote that appeared in the Winter 2011 edition of “Inside,” a journal published by the Corporate Counsel Section of the New York State Bar Association.

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It is time for companies to take their blinders off.  Social networking is not going away.  You can choose to embrace it now or wait until your company is the last one in.  Either way, your company will use social networking at some point.  Why wait?

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If your answer is that there is legal risk, I would submit that this is a poor answer.  Most activities carry legal risk and our job as lawyers is to help our clients manage those risks.  Moreover, the risks that come from social networking are manageable.  This article will help you accomplish this.

The “risk” issue reminds me of when Internet email was hitting corporate desktops in the 1990’s.  Companies engaged in what today seem like nonsensical debates about whether employees needed email.  Of course, they did.  Similarly, they worried about legal risk in the face of unknown law.  Sound familiar?

I remember writing a column in the 1990’s where I said that virtually every employee with a telephone on their desk would have email access within five years.  That is one prediction I got right.

Now I have a new prediction.  Within two years, virtually every company will be using social media like LinkedIn, Facebook, Google+, and Twitter to promote itself.  Does your company really want to be last in?

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Reining in Risk for the Enterprise

Most commentators would acknowledge that social networking for the enterprise is not without risks.  In fact, it is like any other public forum and carries most of the same risks.  Some of the issues that your company needs to consider include copyright infringement, trademark violations, litigation related issues, advertising and employment law, and privacy.

The starting point of any legal analysis of any issue involving the Internet is that the Internet is not the Wild West.  Rather, it is a forum that is at least as regulated as any newspaper.

The problem is that like any new technology, new law trails the development of the technology.  After all, nobody regulates technology that is yet to arrive.

And “new” is where we are with social media in that the law is still developing.  Thus, as we had to do with the Internet generally in the 1990’s when “Internet Law” was still in its infancy, we must look to current law and use common sense to apply it by analogy to social networking.  (The problem is the concept of “common sense” since “law” has been described as “common sense as modified by the legislature and courts.”)

Some of the analogies are easier than others.  For example, it is certainly clear that your company cannot use material created by others in violation of general copyright law.  The Digital Millennium Copyright Act (“DMCA”) is yet another Federal statute that is relevant to social networking.  The DMCA could require that your company promptly take down material from a social networking site it controls whether an employee or third party posted the infringing content[1].

Likewise, your company’s social networking posts must be sensitive to trademark law.  If your trademark analysis says that your company could not use “Coke’s®” logo in a company brochure, you could not use it on your company’s blog.  This is the common sense part.

Another easy one is in the area of litigation.  There can be no doubt that if your company has a litigation hold is in place for whatever reason, this hold would also apply to all social media.  Thus, your company may not erase a blog post that is relevant to litigation although common sense says that it would be wise to remove public access to a problematic post.

Another area of concern is advertising law.  It is certainly “common sense” to assume that the Federal Trade Commission act, which bans unfair and deceptive trade practice[2] and the CAN-SPAM Act[3], which regulates “spam” are relevant to the world of social media.

Using copyright and trademark concerns, litigation holds, and advertising and employment law as mere examples, you can begin to see the importance of training your employees.  It goes without saying that they are the actors for your company and that their lack of training and sensitivity to these issues is your nightmare waiting to happen.

You must dispel the myths about the “Wild West.”  In an online environment where the entire world might see a social networking post, you certainly do not want employees posting things like, “Our only competitor is a thief” because lo and behold defamation law applies to social networking activities.  (That is unless you really want to go down the truth is an absolute defense to libel path.  I will go out on a limb here and guess that you do not.)

Employees’ Personal Social Networking

A whole other area of concern for your company is how your employees use social networking outside the office.  After all, they have personal accounts on Facebook, LinkedIn, Twitter, Google+ and others.  They may not understand that what they say on their personal Facebook account could haunt their employer and them.

If your company does not already have a social media policy in place, you are late at getting there.  However, you can begin rectifying that today and you should.  A great example of a personal blog policy is one Yahoo developed.[4]

Among the most important concepts in the Yahoo policy is that any employees who identify themselves as Yahoo employees “should notify their manager of the existence of their blog just to avoid any surprises.”[5]  Knowledge is power and your company can mitigate the risk employees create online by merely knowing the post is there.  You should encourage this notice.

While many companies may want their employees promoting their business in their personal LinkedIn and Facebook accounts, it is important to sensitize employees to the fact that when they speak on behalf of their employers on a personal social networking page, they are putting their employer at legal risk just as if they were posting on the employer’s “official” LinkedIn page.  This may not be obvious to the average employee who may think that different rules apply on a personal social networking page.  It is the same theme yet again.  It is all about training.

Monitoring Employees’ Online Activities

Many companies have started to monitor their potential and current employees’ online activities.  The fact is that people will post “remarkable” stuff online for all to see.  Many companies will look at that “remarkable” stuff and choose to pass on a potential hire or consider terminating an employee over online posts.

It can be hard to feel sorry for someone who “friends” his boss on Facebook and posts, “My boss is an incompetent fool.”  (“Oops.  I forgot he was among my friends.”)  Still, it is important for your company to have a written policy in place that clearly states that the company does and will continue to monitor social networking activities for posts the company reasonably deems inappropriate.  Further, this policy should make it clear that termination is among the possible consequences for inappropriate activities.

A bit of caution is in order when monitoring personal activities online because some states including New York have laws that prohibit an employer from punishing an employee due to legal leisure time conduct[6].  Nonetheless, many think that it is a best practice to monitor employees’ online activities while being aware of the parameters for action set by statutes or otherwise.

Embrace but Understand

If your company has not yet jumped headfirst into using social networking to its advantage, it is time to do it.  This should be about as obvious as the need for a corporate website should have been in 1996.

While it is true that the law can be murky with social networks, with some education, training and supervision, you could and should minimize those risks.  Do not permit yourself to be a nay-saying lawyer fearful of new technologies.  If that is you, hire an outsider to assist.  Do whatever it takes.  Just do it.

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The trends are clear.  When negotiating deals, we’re all increasingly using online tools like WebEx and GoToMeeting, and conference bridges in lieu of face-to-face meetings.  When doing deals using these tools, it is essential that you have a back channel for real time communication with your team.  I am huge advocate of using an instant message or chat program for this back channel.

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It’s amazing how fast these online meeting tools have changed the way we do deals.  The cost savings of using a WebEx or GoToMeeting can be compelling.  Still, you lose a lot when you’re not face-to-face even if you are using web video conferencing.  The information gained when you’re in the room across the table from someone is invaluable.  Moreover, I think that people find it harder to take hard contrarian positions in-person.  Still, in a world of tight travel budgets, it is increasingly common to forego these and the many other advantages of in-person meetings.

One of the things you can do to improve this remote, one channel environment is to open a back channel for communicating with your own side in real time.  The starting point is to agree on a compatible instant message program.  It could be an encrypted corporate type solution that will make your IT folks happiest (but this type of solution will have some costs), or a no cost solution like AOL’s Instant Messenger (aim.com).

The goals of using this back channel are several.  One is to avoid stepping on each other.  Being able to type messages like “drive home that point,” “let’s change our direction,” or “let me talk” in the background can help keep your team acting like a team and not simply a bunch of uncoordinated one-on-one players.  Another goal is minimizing the need for breaks while your team reconvenes on a private conference bridge to coordinate its efforts, positions, and impression.

You might find it useful to have several chat windows open at once.  One could be a window that your entire team can see and type in, and another might be for the two or three leads only so that they can have their own private chats.

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I’m not sure why, but some of my clients resist setting up this back channel.  I cringe every time I have no way to type something like, “You are making a big mistake with that position.  Stop!  Let’s talk on my other line before you continue down this direction.”  Without that back channel, I’m forced to call a break in a way that draws attention to the disagreement within our team.  That’s not the type of information you want the other side to have.  If they’re smart, they just may be able to exploit that type of internal division.

It’s essential that the other side in a negotiation see your team as a monolith with a single position.  Having to discuss internal positions on a single open phone line with the other side is poor technique.  My recommendation is that you create a back channel and use it to keep internal communications private.

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As a person who’s always doing other people’s tech deals, I understand and still get the adrenaline rush of closing the big deal. In the drive to close deals quickly, letters of intent can be a seemingly convenient way to get a deal closed. However, I think that it’s a path fraught with risk.

After almost 30-years of practicing law, I’m still amazed at the number of

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legal fallacies that even sophisticated business people have about doing deals and properly documenting them. A prominent fallacy is that Letters of Intent (LOI) are always nonbinding or just not important for some reason that I cannot fathom.

I suppose that the misconception arises because — well — it does say “Letter of Intent” and not “Contract” at the top of the page.

Do yourself a favor. Press the “I Believe” button on this one when I tell you that LOIs can be binding agreements — you need to take them seriously, and they need to be written by your attorney.   When you think that you have an exciting deal to close, please take a deep breath and make sure that you get the documentation right.

LOIs go by many names, such as Memorandum of Understanding, Agreement in Principle, and Term Sheet, among other things. Whatever you call them, they can bite you if you’re not properly circumspect about the things you sign.

Yes, it’s exciting when you have a big cloud computing or software as a service (SaaS) deal to sign for your enterprise.  I know that when they mention the LOI, it’s a Right Guard moment. Just understand that once you sign that LOI, you may be blurring the line between engagement and marriage.

If you never close your deal because you never could work out all the details, you may find that LOI under lots of scrutiny. LOIs can and do end up in courtrooms. The essence of the lawsuit is often plain ol’ “breach of contract.”

It really comes down to this. Nonlawyers are often under the misconception that the title of the document absolutely governs the situation.

If the language in your LOI reads like a binding contract, it’s probably a binding contract. Don’t make the mistake of thinking that just because not every detail of your deal is in the LOI that this necessarily means you would win if sued.

The starting point in drafting an LOI is to remember its purpose. Usually, parties are looking to summarize their deal as a prelude to negotiating the details. It’s usually intended to be superseded by a more formal and lengthy document.

Using a SaaS deal as an example, the LOI might talk about the basic service that the vendor will provide.  It might even talk about some of the customizations that they will do for you.  Usually, the parties don’t intend for these terms to be binding if they never sign a more formal contract that includes all the details.

However, the parties usually have terms they do expect to be binding even if they never close the deal. Some examples would include a confidentiality provision and a provision that says each party is responsible for their own attorneys’ fees and other expenses in connection with the negotiation of the deal.

If your LOI isn’t specific about whether it’s really a contract or a nonbinding summary of the state of your negotiations, you could be creating an unpredictable mess for yourself. If there’s ever a dispute about the LOI, you’re forcing a court to look at the document as a whole, accept testimony with those who participated in the LOI creation process, and then make an educated guess as to the intent of the parties.

In this situation, the fact that it says, “Letter of Intent” at the top is just a single piece of evidence that a court will use to find the parties’ intent. If everything below the title reads like a binding agreement, the court may find that you have a contract and not just the simple outline of terms to be negotiated that you thought you had.

In some ways, if your lawyer does it right, this can be simple. A well-drawn LOI has a provision that specifically states to what extent the parties intend it to be a binding agreement. A typical provision will say that the LOI in fact has provisions that the parties intend to be binding even if they never sign another document. It will then go on to specify those provisions.

Whatever you do, just remember that an LOI is a legal document, which you should have your lawyer write. If you think that you are up to the task, let me give you some perspective: As somebody who mentors young lawyers, I’ve yet to find one who fell out of law school with an innate ability to draft legal documents. It takes years of mentoring and training for a young lawyer to master the art of legal writing. I just ask, “Who mentored you?”

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