Monday, September 22, 2014

"Pitch Night" - Tips for Innovative Start-ups

“Pitch Night” is the opportunity for startups and innovators to show their business ideas to potential investors/advisors and get feedback on their presentations. I recently attended one in the health IT sector and thought that the critiques presented by these advisors were invaluable advice, not just for this sector, but for anyone interested in exploiting a new e-business idea. I thought I would share some of these key lessons with you today:

1. Who Will Pay for Your Solution? Identify your business opportunity and target market by explaining who is in pain and willing to pay money for your pain-relieving solution.
  1. Your pitch should explain:
    1. “This is our customer.”
    2. “Our customer base is losing money (estimated at $XX per “transaction”/ “event” for YY transactions per year) because of problems we solve. [Describe the problems.]
    3. “This is why our customer will gladly pay for our solution to overcome their current chronic problems.”
  2. Don’t develop “a tool in search of a problem.”
  3. Talk to 100 buyers before you finalize your solution’s design. Understand how they identify their pain and what your solution does and fails to do to resolve that pain.
  4. Lawyer’s caution: Be careful. If you explain the “problem that you solve,” you might be explaining the trade secret in your patent application. Think about your “inside voice” (trade secret disclosure under a non-disclsoure agreement) and your “outside, or pitch” voice.
2. Finding the Niche: Steer Away from Obvious Competition. While your solution might have a broad market, you risk losing to deep-pocket competitors who also see a broad market. So target on a niche market where you can acquire a dominating competitive advantage.
  1. For large enterprises, third party administrators (TPA’s) already manage large health and wellness programs. They might not see the value of your product.
  2. For smaller enterprises, the value of your technological solution might come from the combination of lower per-capital costs of managed services (normally provided by a TPA) where you combine managed administrative services (like a TPA) and the underlying technological solution in a single pricing plan.
  3. Identify your “similars”: competitors who have a similar solution, and refine your solution to be different.
  4. Explain why you are different and your solution cannot be accessible to your competitors: patents, trade secrets, licensing, governmental monopolies, regulations, first-mover advantage, etc.
3. Prove your Concept. Investors want to know your solution works and is accepted by at least one key “early adopter.” Develop a pilot program to gather performance metrics that demonstrate “proof of concept.”

4. Exploit your Big Data. If your innovative solution collects data (through sensors in the “Internet of Things,” a “tracking” or wearable “monitoring” devices), then develop a plan to own and commercially exploit the value of such Big Data across all your revenue streams.
  1. Lawyer’s caution: Before you exploit personally identifiable information (“PII” under data privacy laws) or personal health information (“PHI” under HIPAA), adopt legal procedures for obtaining consents to use it and for securing it from hackers.
  2. Design your data collection strategy based on whether it complies with privacy rights. It’s “privacy by design.”
5. Exploiting Mobility; Provide Teleservices. Design your solution for use in telemedicine. If you are selling sensors or other tracking devices and services, identify how your solution overcomes existing problems of distance, such as remote villages lacking world-class medical support, or on the ocean or in the air, or other scenarios where it is predictable that the user will lack access to adequate medical care without your solution.

6. Consider Selling to Channels, not just to Customers. A channel consists of an industry player that regularly supports your target customer’s critical needs. It might be a distributor. But it might also be a strategic buyer who has a gap in its product line and would want to integrate your solution into its solution. Find the gap. Such a strategic buyer might invest in return for some form of preferential distribution rights.

7. Sustainable User Intrigue, not Fatigue. In your sale to users, you cannot merely sell them the product and a six-pack of diagnostic data presentations from the user’s uploading of his/her data to your servers. Over time, the user will become tired because “nothing changes” after the initial use and the initial improvement. To be sustainable, you must design sustainable user demand after the initial “quick success.” Possible solutions:
  1. Telemedicine
  2. Real-time feedback loop for health improvement (or other benefits) when your solution collects the data from the user
  3. “Emergency” alerts, dashboards and “managed care” support
  4. Habit-forming disruptive self-service that simplifies life and gives it more meaning with less hassle.

Friday, September 19, 2014

Legal Surprises When You "Like" a Facebook Posting

In a time when online presence defines many of our perceptions, we often think that online comments and postings about an employer would be a big no-no. Think again. A recent decision by the NLRB has given the green light to employees to express themselves freely, even if the employer may see those comments as defamatory.  Employers, beware.

In a recent decision by the National Relations Labor Board in Triple Play Sports Bar & Grille, 361 NLRB No. 31 (August 22, 2014) the NLRB upheld an earlier decision (NLRB 34-CA-01291, January 3, 2012) that the Triple Play Sports Bar & Grille had unlawfully discharged two employees for making disloyal and defamatory posts about their employer in their participation in a Facebook discussion.  In this case, several employees discovered that due to mistakes in their employer’s calculations of their withholding taxes, they would have to pay more taxes and took to their Facebook accounts with their complaints. The recently departed employee posted:
"Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money...Wtf!!!!"
In response to this complaint, other employees replied in kind, liked the post and customers of Triple Play commented. The Bar &Grille caught whiff of the thread and terminated two employees for their actions.

Long story made short: the NLRB ruled that the activities of these employees constituted NLR Act, Section 7, protected “concerted activities” for the purpose of employees’ mutual aid and protection and  their right to act together to improve terms and conditions of employment. The ruling found that their discussion related to known tax liabilities in their workplace and issues to be raised in the next staff meeting (ergo, protected and concerted) and that no intended malice or false statements were made by them regarding the products and services of their employer and directed to the public.  This latter was a major contention by the Bar & Grille, which had an Internet/Blogging employment policy prohibiting engaging in “inappropriate discussions about the company, management and/or co-workers.”  This policy was also ruled unlawful in that its employees could perceive these “discussions” to include protected activities in violation of  NLR Act, Section 8 (a)(1), which protects employees’ rights in NLR Act, Section 7, despite the policy’s  “savings” clause, “In the event state or federal law precludes this policy, then it is of no force or effect.”

Lesson to all employers:  Know that certain social media activities are protected by the National Labor Relations Act, particularly when two or more employees act together to improve terms and conditions of employment.  Learn the distinction between employee protected and unprotected social media activities, both in and out of the workplace.  Review your employee policies to ensure compliance with the latest NLRB decisions.

Tuesday, September 2, 2014

“Airtight” Online “Terms of Use” via Clickwrap or Browsewrap

Do you know the differences between a “clickwrap” agreement and a “browse-wrap” agreement?  If you don’t, you might be unable to enforce your website’s “terms of use.”  In either case, it might be time to redesign your Website’s legal links to ensure they are valid contracts enforceable against your users.

In a recent decision, the U.S. Court of Appeals for the Ninth Circuit upheld an earlier ruling (Nguyen v. Barnes & Noble, Inc., USDC, C.D. California, Aug. 28, 2012) that an online customer at an e-commerce website did not agree to the website’s terms and conditions governing website use and sale of goods, even though there was a conspicuous hyperlink on every page to the website’s “Terms of Use.”   Nguyen v. Barnes & Noble, Inc. (9th Cir. Aug. 18, 2014).  The court held that the user never gave valid binding consent to arbitration or choice of law terms, because (1) the user did not click on the “Terms of Use”, (2) there was “no notice to users” that they were entering into a contract by using the website, and (3) there was no prompt to users to take any affirmative action to demonstrate assent to formation of a contract.  As a result, the website owner was unable to rely upon the Terms of Use, and the consumer was entitled to sue in court for claims arising out of a failed online commercial purchase.

For website users, the decision encourages never clicking on any hyperlinks relating to “terms of use”, “privacy,” “legal conditions” or other hyperlinks customarily posted by website owners.  For website owners, the decision is a wake-up call to immediately change the layout and functioning of the “terms of use,” “legal conditions,” “privacy” and other warnings.

In Nguyen, the court reminded the parties that there are only two flavors of contracts formed on the Internet.

  • Under “clickwrap” (or “click-through”) agreements, website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use.
  • Under “browse-wrap” agreements, a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the page, but there is no functionality requiring the user to manifest assent to the terms and conditions expressly.  Because there is no affirmative duty to express such assent, the determination of the validity of the browse-wrap contract depends on whether the user has actual or constructive knowledge of the website’s terms and conditions.  (Such knowledge may be presented on the website or may be given later, in the form of a mailed notice of breach and demand for cure.  Without such knowledge, there is no online contract.

The Nguyen decision did not address whether the website user is deemed to have assented to the website’s privacy policy.   However, the same principles could apply if the user were to argue that she had no actual knowledge of the privacy policy and never assented to the use of cookies, pixel tags, metadata analysis, profiling or other clandestine surveillance, or the re-transfer of personal information to third parties.

To ensure actual consent, the Court warned that “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers.”  Website owners now must be more “aggressive” or “unfriendly” by giving “actual notice” of the terms and demanding either a clickwrap or a browse-wrap agreement.  “User experience” (“UX”) engineers must now find solutions to keep the website user engaged and in a positive mood, while ensuring that the user is aware of the terms of use and consents to such terms.

One solution involves delaying an “I agree” button (or a display of actual terms of use) until the user is ready to make a purchase or submit information.  But that probably is too late, since the website owner will want to keep any dispute (even as to pre-purchase website usage) out of court and limited to applicable law and a chosen arbitral forum.

Another solution is to force a “pop-up” “I consent” when the user wants to leave the home page.  This could work for privacy matters as well so long as no customer profiling information (from cookies, etc.) were collected at the landing page.  That would require a change in search engine optimization and metatagging customs.  Or “Privacy” might be incorporated into “Terms of Use” to reduce the number of “approval” clicks by users.

A third solution might involve displaying a “Website Terms of Service” button that states “By clicking here, you are indicating that you have read and agree to the Terms of Service.”

The bottom line: “Whether a user has inquiry notice of a browsewrap agreement,  in turn, depends on the design and content of the website and agreement’s webpage.”  Slip opinion, p. 12.  This decision invites everyone to review and perhaps to redesign the legal framework for their online website-based legal agreements.