France hits E-Bay with steep penalty for contributory trademark infringement

The Wall Street Journal just posted an article entitled EBay Loses Suit Over Luxury Fakes. Apparently, a French court sided with LVMH Moët Hennessy Louis Vuitton and sister company Christian Dior SA, which had accused eBay of not taking the necessary steps to ensure that the accessories sold on its Web site were not counterfeit (despite the fact that E-Bay has a facility where trademark holders can report potential fakes to E-Bay to have the reported auctions shutdown).

The French court ordered eBay Inc. to pay Louis Vuitton and other luxury-goods brands 40 million euros ($63.1 million) in damages for fake goods sold through the online retailer. Givenchy perfumes was also a party to this case, and though the perfumes sold on eBay were legitimate, LVMH strictly limits their distribution to authorized dealers such as perfume chains and department stores.

There are two troubling aspects of this case, aside from the high damages awarded against E-Bay. First, is the increasing willingness to require companies to monitor the activities of their customers, and second, as it relates to the Givenchy perfumes on E-Bay, to hold e-commerce companies to an almost impossible standard for monitoring the “legitimacy” of third-party transactions.

Let me explain: As it relates to US Copyright law, our system has long held a distinction between a publisher and a distributor. A publisher, arguably, reviews their work and is deemed responsible for the works that reach the public. A distributor, by comparison, doesn’t read a magazine or newspaper, and simply delivers it to store shelves. Therefore, if there’s a copyright issue, the distributor is deemed to have no knowledge of (nor the capability to review) material being distributed. This makes sense, if you think about it, because a distributor probably distributes hundreds of magazines, and doesn’t have any subject matter experience in what they deliver to the stores.

In the Internet context, this works well for an Internet service provider (ISP) or web hosting company, because they have potentially thousands or millions of customers, and have absolutely no subject matter or domain expertise regarding their customer’s websites. The mere thought of having your ISP review your Internet traffic inspires Orwellian notions in all of us. The same argument can be made for E-Bay. Millions of transactions occur every day on E-Bay, and I suspect E-Bay doesn’t have a clue about the subject matter of those auctions.

Unfortunately, this publisher/distributor distinction in copyright law hasn’t made its way into trademark law, and this is where many e-commerce companies run into trouble. Trademarks are a completely different aspect of intellectual property, and are treated completely different. The main objective of trademark law is to protect the consumer, not the owner of the mark, from improperly marked products and services. Therefore, a completely different set of laws and risks exist, and if an e-commerce company tries to manage its risk against contributory trademark infringement using the notions of the publisher/distributor distinction in copyright law, they are bound to eventually find themselves in serious trouble.

For example, the safe harbor provisions of the Digital Millennium Copyright Act (DMCA) don’t apply to trademarks, only to claims of copyright infringement. If you don’t have strong procedures and mechanisms to respond to, and deal with, contributory trademark infringement claims, you run the risk of loosing a serious lawsuit. Such claims put the unfortunate e-commerce company or ISP in the role of a judge, trying to ascertain the legitimacy of a claim against one of its customers. Unfortunately, the way the law is written, you should almost always conduct your business assuming the complaining party is correct. In trademark law, e-commerce companies and ISP’s are at risk from the plaintiff of a contributory trademark infringement claim, not the defendant (i.e. their customer).

This E-Bay case ratchets up the risk even further for e-commerce companies and ISP’s, by presupposing E-Bay is somehow able to ascertain which of its customers has the legal right to sell Givenchy perfumes. Note that E-Bay’s Seller’s Rules contains a long-list of what’s acceptable and what’s not, and that it requires sellers to adhere to the intellectual property requirements (i.e. trademark) and restrictions of the products they sell. Therefore, a seller is already violating E-Bay’s terms of use when selling Givenchy perfumes. Apparently, E-Bay is somehow supposed to evaluate the validity of each seller’s licensing arrangement with each of its carried brands, and ascertain who is legally entitled to sell what at what given time.

Obviously, this is an absurd position for E-Bay and any other e-commerce company or ISP. There are ways of handling this, such as banning Givenchy and any other product that claims a right to sue for contributory trademark infringement. Such a heavy-handed approach could seriously undermine E-Bay’s value to consumers (i.e. shouldn’t I be able to sell my bottle of Givenchy perfume, if I purchased it for my wife who turned out not to like it?).

There are two recommendations I have, give this case:

For e-commerce companies and ISP’s: Review your policies and procedures for trademark infringement claims. Are they fundamentally different from copyright claims? If not, you need to change them, and you must unfortunately place a heavy burden on the defendant (i.e. your customer).

For the legal system: Confer some rules and safe harbors for e-commerce companies and ISP’s, regarding actions for contributory trademark infringement, possibly expanding the publisher/distributor distinction to online trademark cases.

It’s all a matter of prioritization

Many businesses — including some I’ve been involved with — suffer from endless firefighting. What gets worked on (i.e. fixed) is what is the most urgent at the time, usually associated with some serious customer complaining, or financial or legal risk. Ultimately, the business becomes a team of heroes, burning everyone out and not really making serious headway in what is really important: growing the business and its revenue base. The “hero model” is very dangerous for a business, because there is so much reliance on individuals. If a key individual gets sick or leaves, it creates serious disruption to the business.

I’ve found, whether we’re talking about the business priorities as a whole, or managing a software development team or project, it helps to identify priorities and focus on the highest priority issues first. By focusing on what’s important, you move the business forward and you will naturally move away from the hero model. By staying focused on the key drivers of your business (assuming you know what they truly are), your processes and systems should become more robust, fault tolerant and less reliant on key individuals.

There are many ways to devise a priority schedule, but here’s one I’ve found that is simple, easy to use and quite effective. It’s a simple “sev system” or severity scale.

How many people or businesses do you know, that have a tendency to focus on SEV3’s or SEV4’s? We get caught up on how things look, versus how they perform or what they mean to our business, our customers or our employees.

My advice is to create, revise and maintain a list of your business tasks and priorities. Everything on the list has an assigned SEV code, and you devise a corporate policy such as “No SEV1’s will be on the list for more than a week” and “We won’t work on lower SEV issues, when higher SEV issues exist.” Devise a system of accountability, and assign your heroes to the important SEV tasks.

One other suggestion is to keep a corporate journal, wiki or help system that serves to document all your processes, functionality and systems. Make updating this system one of the components of every task. Make sure a different employee or department “tests” the functionality or issue, before its removed from the task list.

By objectively tracking the severity of the issues in your business, you will add accountability and ensure the most important and strategic issues are confronted and resolved in your business, thereby helping to maximize revenues and contain costs within your business.

The new gold-rush: Top Level Domains (TLDs)

ICANN, the overseer of the domain registry system and top-level domains (i.e. .com, .net, .info, .cc, .us, etc) has approved a plan to sell unlimited top-level domains (TLDs) on the open market.

Conceivably, anyone can purchase a new TLD, provided they are willing to shell out the reported $100,000 to $500,000 per TLD.

This number may seem like an astronomical amount, but when one considers the marketing potential for the right TLD, $500,000 could seem like chump change. For example, .com is frequently mistyped by people as .cm or .cmo. Obtaining those two TLD’s could give the potential owner a great deal of leverage to convert the typo into the appropriate .com, but turning themselves into a referral source.

Alternatively, a company could create some serious leverage with branding and trademarking, creating highly desirable TLDs that have a specific connotation, such as:

• .secure - Which is carefully controlled by the TLD owner, and guarantees any .secure website is audited and “scam proof.”
• .bank, .doctor, .law - Just about any market or industry niche could use its own TLD, and could become highly desirable for members of that market.
• .kids, .singles - Just about any market segment, such as “certified kid friendly”.
• .comcast, .ibm, .aol - Companies, especially ISP’s and hosting companies, would definitely want to get on this bandwagon and support customer accounts on its TLD’s.

Without a doubt, the new policy for TLDs will represent a tremendous gold-rush for those companies willing to get in early, make effective use of their new TLDs, and market it properly to create demand and market awareness.

E-Commerce can create interesting sales tax liabilities

The Wall Street Journal has an interesting article about Amazon today, entitled Will Amazon Get a Visit From the Tax Man?.

It appears that Amazon has a number of large distribution warehouses in some states, such as Texas, Pennsylvania and Indiana, but doesn’t pay sales taxes in those states. Amazon is trying to skirt the issue by saying the distribution warehouses are wholly owned subsidiaries of Amazon. Amazon’s theory is: The subsidiaries don’t sell products to consumers, so they don’t need to pay sales tax, and since Amazon itself doesn’t own the warehouses (it’s subsidiaries do), it doesn’t need to pay sales tax either.

The article does a good job talking about the issue regarding Amazon, but could go into better detail on the tax issues an e-commerce company must deal with. My standard disclaimer: Please consult with a CPA or tax attorney, as what I am about to discuss may be incomplete or inaccurate for your particular situation.

Note that many e-commerce businesses don’t fully understand The Internet Tax Freedom Act, which doesn’t prohibit all taxing, per se. What it does is prohibit taxing Internet access, imposing discriminatory Internet-only taxes and multiple taxes on electronic commerce. Contrary to popular belief, it does not prohibit state sales or use tax.

Sales taxes can be somewhat complex, depending on the subject matter. The easiest case is a typical product, like a book or DVD. If a business has a “sufficient nexus” within a state, it generally has to collect sales tax from the residents in that state. The “sufficient nexus” requirement is met by physical presence (i.e. the business has an office or warehouse in the state), but “sufficient nexus” can also be met without physical presence. And, this is one area where things can become tricky. The “sufficient nexus” requirement could be met, if a business has a “close relationship” with third-party contractors.

Things become murkier still, regarding some products or services. Let’s look at services for a moment: Instant Gift Certificates are becoming a popular way for service-based businesses to “sell” their services on the Internet. Some states, like New Mexico, charge a “gross receipts tax” (or GRT) on services. If a business in New Mexico sells a dollar-based gift certificate (i.e. a $100 gift certificate), there is no tax to charge until the gift certificate is redeemed. However, if the business sells a service-based gift certificate (i.e. “one Swedish massage”), the purchaser should be charged GRT upon the sale of the gift certificate.

Worse still, some states (like New Jersey) charge a tax on just some services. So, for example, massages are taxed but facials are not (both facials and massages are typically provided by the same business). So, a business selling a service-based gift certificate needs to keep track of what services are taxed and which are not, and make sure the tax is properly applied at the time of sale.

For products, things become murky, depending on the subject matter and location of the consumer. As it relates to location, some major cities have different sales tax rates than the overall state (i.e. Chicago or New York). So, if a business has “sufficient nexus” in the State of New York, it must keep track of all the tax schedules within that state, and know exactly which tax schedule to apply to which consumer in that state. As it relates to subject matter, all sorts of products will suffer various restrictions or tax exceptions. For example:

• Gift cards and gift certificates have various restrictions on maintenance fees, expiration dates (depending on where the consumer sits) and escheatment (depending on where the business sits).
• Wine and other alcoholic beverages have restrictions or varying tax implications, depending on the state, county or city in which the consumer sits.
• Chemicals, paints and industrial solutions have many restrictions, permit requirements and tax implications.

The problem for an e-commerce company, is that it’s sometimes difficult to identify all the tax laws and burdens, create the programming logic to identify which products or services have a sales tax burden to which customer, and then keep the tax schedules (and treatment) up-to-date.

The trick is, to be careful on which state you create a “sufficient nexus” for sales tax purposes, and to do your research BEFORE you start selling your product or service on the Internet, because your business could be liable for back-taxes going back many years.

A Sample Mutual Non-Disclosure Statement (NDA)

This is perhaps one of the more useful documents in my collection: It’s the mutual non-disclosure statement, or NDA. It’s available here as a MS Word document, and I’ve included it below if you’d rather cut-and-paste from your browser.

I have some tips-and-tricks as it relates to NDA’s, that everyone should consider.

• If you’re thinking about signing someone else’s NDA, check for one key ingredient: Is it mutual??!? Mutual NDA’s basically define the parties at the top, then throughout the rest of the document, reference “disclosing party” and “receiving party.” Basically, it doesn’t specifically call-out one individual in the document. If it’s not mutual, my suggestion is to either hire an attorney to review the document for you or just flat-out refuse to sign it. The reason? Non-mutual NDA’s frequently (although not always) include other terms that could bind you, unrelated to disclosure, such as one-sided non-competition or non-solicitation clauses.
• Not sure about their NDA? Sign both! That is, have the opposing party sign your NDA, and you sign theirs. This is a great way to make sure you are both covered.

Want help??!?

I’ve started a new law firm, called Law 4 Small Business (L4SB), focused on the needs of small and medium business. Give us a call and see how we can help you create an effective NDA.

My attached NDA includes a paragraph regarding non-competition (i.e. neither party can compete against the other party, using the confidential information) and non-enticement (i.e. neither party can raid the employees of the other). Note that the paragraph numbers are auto-updating, if you’re using this in MS Word. If you’re not using in MS Word, and you add/remove a paragraph, you will need to manually update the paragraph numbers.

So, before using my sample NDA, please make sure to:

• Delete the non-compete (paragraph 7) and/or enticement (paragraph 8), if you feel they don’t apply to your situation.
• Do a global search/replace to insert your name. Find: “[Your-Company]”, replace it with your legal name.
• Do a global search/replace to insert your short name. Find: “[Your-Company-Short-Name]”, replace it with the short-name of your company. For example, if your legal name is “ACME Shoe Repair and Lacing, LLC”, but everyone knows you as “ACME Shoe”, search for “[Your-Company-Short-Name]” and replace it with “ACME Shoe”.
• Find “[Your-State]” in Paragraph 13, Governing Law, and put in the State you or your company resides in.

Good luck!

MUTUAL CONFIDENTIALITY AGREEMENT,
NON-COMPETE & NON-SOLICITATION

This Mutual Confidentiality, Non-Compete and Non-Solicitation Agreement (this “Agreement”) is made as of ________________, 20___ (the “Effective Date”), by and between [Your-Company] (“[Your-Company-Short-Name]”) and ______________________________ (“Discussion Party”). Your-Company-Short-Name and Discussion Party are each referred to herein as a “party” and together as the “parties”.

A. Your-Company-Short-Name and Discussion Party are considering entering into a business relationship and/or transaction with each other (the “Proposed Transactions”).

B. In connection with evaluating the Proposed Transaction, each of Your-Company-Short-Name and Discussion Party has and will be furnishing the other with certain trade secrets, technical data, marketing data, and other proprietary and nonpublic information. As a condition to each of Your-Company-Short-Name and Discussion Party furnishing such information to the other, each of the parties is requiring the other to agree to treat the Confidential Information (as defined below) confidentially and in all respects in accordance with this Agreement. For purposes hereof, the party disclosing its Confidential Information to the other shall be referred to as the “Disclosing Party” and the party receiving the Confidential Information of the other party shall, together with such recipient party’s subsidiaries and affiliates, be referred to as the “Receiving Party”.

NOW THEREFORE, in consideration of the foregoing Recitals and of the mutual promises and covenants set forth below, the parties agree as follows:

1. Confidential Information. The term “Confidential Information” includes all documents, materials and other information, whether in oral, written or electronic form, concerning the Disclosing Party that are furnished by or on behalf of the Disclosing Party and identified by the Disclosing Party either orally or in writing as confidential to the Receiving Party at the time of disclosure, and includes, without limitation, all notes, analyses, compilations, materials, products, product information, pricing information, and studies or other documents or materials prepared by the Receiving Party and its agents and employees which contain or reflect all or any portion of the originally disclosed materials. Notwithstanding the foregoing, Confidential Information does not include information that: (i) was or becomes generally available to the public other than as a result of a disclosure by the Receiving Party or its agents or representatives to one or more unauthorized parties; or (ii) becomes available to the Receiving Party on a nonconfidential basis from an independent source without breach of any confidentiality obligations.

2. Covenant of Confidentiality. The Receiving Party covenants and agrees to keep confidential all Confidential Information of the Disclosing Party confidential, with the same level of care accorded by the Receiving Party to its own proprietary information, and the Receiving Party further covenants and agrees not to disclose or otherwise convey any portion of such Confidential Information either within or outside the Receiving Party’s organization, except to those of the Receiving Party’s employees, accountants, attorneys, agents, representatives and advisers who need to know such information for the purpose of the Proposed Transaction (it being understood and agreed by the Receiving Party that such employees, agents, advisers and representatives shall be informed by the Receiving Party of the confidential nature of such information and the Receiving Party shall direct them to treat such information confidentially and to return such Confidential Information to the Receiving Party upon request in accordance with this Agreement). The Receiving Party further covenants and agrees to use the Confidential Information solely with respect to the Proposed Transaction and not to use the Confidential Information directly or indirectly for any other purpose; provided that if any definitive agreement governing the Proposed Transaction (a “Definitive Agreement”) shall permit broader use of any of the Confidential Information, the terms of such Definitive Agreement shall control. The obligations under this Section 2 shall continue for three years from the date of disclosure of the particular information.

3. Return of Materials. The Receiving Party will promptly (but in any event within ten (10) business days) after the written request of the Disclosing Party return to the Disclosing Party (or with the Disclosing Party’s permission, destroy) the Confidential Information (without retaining any copies thereof), together with any notes, discs, tapes and other writings and materials prepared by or on behalf of the Receiving Party based on the Confidential Information.

4. Confidentiality of the Proposed Transaction. The parties covenant and agree not to disclose to any person any terms or conditions, or the existence or status, of any Proposed Transaction except that disclosure of such information may be made when disclosure is required by law upon advice of legal counsel and except as may otherwise be permitted or required by any Definitive Agreement.

5. Permitted Disclosures. Notwithstanding the foregoing provisions, if any court, governmental agency or regulatory body requires that the Receiving Party disclose any of the Confidential Information of the Disclosing Party, the Receiving Party may disclose to such governmental authority that portion of the Confidential Information which the Receiving Party’s legal counsel advises it in writing must be disclosed. The Receiving Party shall, however, furnish the Disclosing Party with prompt written notice of such requests or demands as far in advance of such disclosure as reasonably practicable in order that the Disclosing Party may seek an appropriate protective order, and the Receiving Party shall cooperate with the Disclosing Party in seeking such an order.

6. No Implied License. Neither this Agreement nor the disclosure of the Confidential Information shall be construed as a legally binding obligation of the parties to consummate any Proposed Transaction. No license or right is granted or implied in favor of either party with respect to any intellectual property rights of the other party.

7. Non-Compete. Independent of any obligation under any other paragraph of this Agreement, for a period of one (1) year following Effective Date, neither party shall directly or indirectly, whether as an individual for its own account, or for or with any other person, firm, corporation, partnership, joint venture, association, or other entity whatsoever, which is or intends to be engaged in the same line of business as either party, or in such other business competitive with the other party, solicit, interfere with, or endeavor to entice away from the other party, any person, firm, corporation, partnership, or entity of any kind whatsoever, which was or is a client of the other party for the parties have become aware of as a result of this Agreement.

8. Enticement. Independent of any obligation under any other paragraph of this Agreement, for a period of one (1) year following Effective Date, neither party shall, directly or indirectly, whether individually for its own account or for or with any other person, firm, corporation, partnership, joint venture, association or other entity whatsoever, solicit, hire or endeavor to entice away from the other party any person who is employed or engaged by the other party in any managerial, technical, professional or advisory, without the express written permission of the other party.

9. Remedies. It is further understood and agreed that money damages would not be a sufficient remedy for any breach of this Agreement and that the Disclosing Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach without the necessity of posting bond. Such remedies shall not be deemed to be the exclusive remedy for breach of this Agreement, but shall be in addition to all other remedies that may be available at law or equity. Each party agrees to be fully responsible to the other party for, and indemnify such other party against, any damage or harm (including without limitation the legal fees and other costs incurred in enforcing such other party’s rights hereunder) caused to such other party by any breach of this Agreement by itself, its employees, advisers, representatives or agents.

10. Waivers. No failure or delay in exercising any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.

11. Severability. In the event any provision of this Agreement is held to be unenforceable or contrary to law then the Agreement shall be interpreted, to the extent possible, without such provision.

12. Entire Agreement; Amendments. This Agreement contains the entire understanding between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. No modification or waiver of this Agreement or any provision hereof, nor consent to any departure therefrom shall in any event be effective, irrespective of any course of dealing between the parties, unless the same shall be in a writing executed by duly authorized officers of the party whose rights are being waived, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which it is given.

13. Governing Law. This Agreement shall be subject to and governed by the internal laws of the State of [Your-State], without giving effect to conflicts of law principles.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first set forth above.

     _______________________     [Your-Company]

By: _______________________ By: _______________________

Its: _______________________ Its: _______________________

Objective, transparent decision making …

As an executive and consultant, I’ve run into many points in my life where I’ve had to make a complicated decision based on a number of competing objectives. In most instances, I can make a decision fairly quickly after doing my research or evaluating my options.

In some situations, a quick decision isn’t practical, possible or best. Have you ever had situations where:

• It’s not clear which option would be best?
• A decision is politically charged (i.e. Transparency is essential, because the stakes are high and everyone concerned wants to know the decision is fair)?
• Someone important — perhaps a family member or client — wants to know you’re being professional and being through in your decision (or recommendation)?

Well, I have just the thing! I call it a “Comparison-based Decision Matrix”. It’s a simple, great looking, spreadsheet that enables you to compare competing options on an apples-to-apples basis. The spreadsheet takes the difficulty out of making a decision, although creates a new difficulty: figuring out what the factors in your decision really are, and assigning weights to those factors.

Download the spreadsheet. It contains a simple decision as an example: “How should we process Credit Cards today?” It compares three possibilities.

How to use the Comparison-based Decision Matrix

1. What is the issue to be decided? Put this in B6. In my example, I have “How should we process Credit Cards today?”
2. What are the decision factors that influence your decision? Nothing is too small or unimportant. Put it all down. Insert additional lines, as you need them. In my example, I have “Best for Customer Satisfaction,” “Cheapest Long-Term” and “Cheapest Short-Term” amongst others.
3. Now comes the hard part: assign weights to each of your factors. Some are more important than others, so you need to weigh each factor against the others. Give each a weight, so that all your weights total up to 100. The spreadsheet will help you. If one factor is weighted 20 and another 10, the one weighted 20 is twice as important as the one weighing 10.
4. Put in the options. In my example, I have three. Replace those with your options. If you one have two options, ignore the third column of options. If you have more than three options, I’ve put instructions in the spreadsheet on how you can increase the number of options. (It requires you to insert a couple of columns and copy some formulas).
5. Rate each option against each other for each factor, with 3 being the best and 1 being the worst. In my example, let’s look at “Best for Customer Satisfaction”. Option A is the worst option, so it gets a “1″. Option C is the best options, so it gets a “3″.
6. Finally, look at the final score for each option. The one with the highest score wins!

It’s actually a lot easier than it sounds. Try it out, and see how it works.

Ideas for the Comparison-based Decision Matrix

This can be a tool for a number of really interesting decisions:

• Selecting the best candidate for an open employment position.
• Selecting the best political candidate, when trying to determine who to vote for.
• My personal favorite: I’d love, love, love to see a political figure (i.e. such as a senator, member of congress, or other legislator) use such a tool in determine what bills, statutes and other laws they vote on. If nothing else, to specifically enumerate what they stand for (i.e. what’s on the list of factors), and how those factors weighed into their decision on whether to support or reject a certain piece of legislation. Could you imagine such a world??!?
• Selecting whether to buy or lease your next vehicle, as well as what vehicle to select.
• Any decision you feel you run the risk of making a decision based on emotions.
• A career move.
• Selecting which university you wish to obtain your degree.
• And thousands of other decisions, when you have more than one or two factors, with multiple options.

Good luck to you and your decisions! If you hear of any politicians, whether they be Republican, Democrat or independent; conservative or liberal; at the federal, state or local level; that uses such a method to introduce transparency into their decision making, PLEASE let me know about it!

Beware of Lifetime Warranties

“Buy it for looks. Buy it for life.”

Moen purchased a great reputation, by dumping millions of dollars into its very clever marketing campaign. It makes the consumer think “great looks,” and they really stand behind their products. Moen isn’t the only company to boast of a “lifetime warranty.” Just google lifetime warranty to see what pops up.

Many companies will use the phrase “limited lifetime warranty,” at least alerting you that there are limitations. Be very, very wary with “lifetime warranty” claims, whether they are preceded with “limited” or not. From my experience, lifetime warranties are worthless and definitely not worthy of any consideration whatsoever, when making a purchase decision. This goes for Moen.

Let me tell you why, but before I do, Seth Godin writes on his blog that there is indeed at least one company that stands behind the phrase “lifetime warranty.” That company is Le Creuset, the “french enamel on cast iron cookware people.” My hats off to Le Creuset … I’ll be on the lookout for other companies of this ilk, but they are unfortunately few and far between.

Why are lifetime warranties worthless? While many lifetime warranties are different, you will generally find some combination of four significant limitations to lifetime warranties, that really reduce their value:

• Warranty Card - Many manufacturers require you to send in a “warranty registration card” (on your own dime, using your own postage), that contains your name and address, date of purchase, place of purchase, etc. There are many legitimate reasons for this warranty registration card, but it also helps the manufacturer prevent people from avoiding the limitations in a lifetime warranty. Additionally, most manufactures limit how long you can wait from the date of purchase, before you can submit the warranty registration card (usually a couple of months). If you miss this deadline, many manufacturers will disclaim your warranty. Because many people don’t send in their warranty registration cards, this is an excellent way for manufactures to weasel out of their lifetime warranty.
• Original consumer purchaser - You need to save your receipt, which most people will lose within the first year. You cannot transfer the warranty to someone else, even if they buy the product directly from you or they buy it installed in a home. Also, the warranty doesn’t apply, even if you buy a new home from a builder. In the case of Moen, if you are buying a home with Moen faucets, you are buying faucets without any warranty whatsoever. See Moen Warranty Information for more.
• As long as the original consumer purchaser owns their [fill in the blank: home, boat, car, etc] - The fact that you’ve installed a product in your home is immaterial to the product itself, but it allows manufactures to get out of the warranty sooner. If your name happens to be on the receipt, they will generally not ship a replacement to a different name. Similarly, they will not ship a replacement product to a different address, from what they have on file with the warranty registration card.
• Original packaging - While Moen doesn’t have this requirement, many resellers, distributors and manufacturers will require you to send in the original packaging to take advantage of a lifetime warranty. Again, just google “lifetime warranty” “original package” to get a sense of how common this is. Obviously, very few people keep the packaging of their purchased products for any appreciable length of time. From a seller’s perspective, this is a great way to weasel out of a lifetime warranty.

The above limitations will significantly reduce any warranty, lifetime or otherwise. I just personally find them onerous on a lifetime warranty, only because these limitations are so common and so damaging to the value of a lifetime warranty.

My advice is, stop thinking of Moen as high-quality faucets. They aren’t any better (or worse) than the average faucet maker out there. And, when confronted with any warranty — but especially “lifetime” or “limited lifetime” warranties — ask to see the “fine print.” Examine the warranty for the language above, and if it limits you in any of the ways above, assume the warranty is worthless. In other words, don’t make your purchase decision based on the warranty (or lack thereof).

How to ensure you get the very best mortgage rate and deal

I don’t know about you, but I’m a terrible juggler. Two balls, I can handle. But, give me three or more balls, and not just one or two - but all the balls - will end up on the floor.

I have the same problem when trying to make a decision that involves a number of different factors. I’ll quickly loose track of all the variables, end up making the decision on gut instinct, and then royally screw up the task at hand. That can happen to me when buying a new car.

• Quick Tips for Getting a Mortgage or Refinancing
• Using a Spreadsheet to Keep Mortgage Brokers Honest

And it can definitely happen to me, when I’m trying to find a mortgage or refinance my home. It seems like every bank or mortgage broker I talk to, confuses me more than the previous one. I end up getting all confused and embarrassed, and end up make a hasty decision that I regret for years - since a bad mortgage decision can be one of the costliest mistakes to make in one’s life.

So, to compensate for this tremendous shortcoming in my character, I’ve come up with a system and I’m now sharing it with you. It involves Microsoft Excel, so apologies to those of you who don’t use Excel or detest computers. You also need to make sure you have the “Analysis ToolPak” add-in installed for Excel, which is a free add-in on the office install disks. Microsoft has a brief tutorial on how to install the Analysis ToolPak. You do NOT need the Analysis ToolPak VBA add-in.

Don’t worry. Take a deep breath. If you can suffer through this, and learn the spreadsheet, you can save yourself a LOT of money. Even better, you’ll have a tool to keep everyone honest and to help with negotiations. For example, I’ve used this spreadsheet to review my closing documents, only to find the closing documents were in error. You cannot imagine how amazed your mortgage broker will be, when you correct his or her numbers! At any rate, I’m going to walk you through the entire spreadsheet and help you understand how to add numbers to it and compare not just the mortgage rates, but closing costs, points, etc, to determine what is the very best mortgage for you!

Quick Tips on Getting a Mortgage or Refinancing

Okay, first some quick tips. Then, I’ll give you my recommended steps.

• Mortgage brokers almost will never give you the best deal. They know this, so will talk about “service” and “not leaving you when the loan is done.” That’s all a bunch of BS. At the end of the day, you want to pay the least amount of money. Even $100 per month can go a long way to upgrading your cable service, paying for a better car, etc. Don’t give your money away!
• Some of the best rates I’ve found are at eloan. They are a reputable company and the last 4 of my mortgages were through them.
• Do your research! A great place to search for rates is Mortgage-X.
• Don’t forget to check with your bank - yes, the one you have your checking account with - as they may have competitive rates for existing customers.
• Believe it or not, it’s okay to pay points. Points buy down the long-term cost of the loan. If you believe you will not refinance for at least three years, points are an excellent way to save money in the long-run. Make sure you look at a few mortgages with points, and see how they compare. Points are also great for lowering the monthly rate (because you have a lower interest rate).
• It’s sometimes difficult to get all the closing costs, and different companies and brokers will throw different numbers at you. At the end of the day, they all have to put those numbers on a HUD. Do NOT agree to do a deal, until you’ve seen the HUD and you’ve plugged the numbers into the spreadsheet.

Using a Mortgage Spreadsheet to Keep Mortgage Brokers Honest

On to Larry’s recommended steps for obtaining the very best mortgage rate and deal you can:

1. Download my Mortgage Analysis Spreadsheet. (It’s virus free, promise!)
2. Shop for a mortgage rate, like you would normally do. Talk to people. Find a mortgage broker you can trust.
3. Do you have a rate and mortgage in mind? Get a HUD, and put in the details of that mortgage in the “Baseline” of the spreadsheet.
4. Go to eloan.com and see what sort of mortgage you can obtain from them.
5. Whatever type of loan you’re considering, i.e. 30-year, consider ARM and fixed. Consider each with some points. Put them all in the spreadsheet.
6. Now ask yourself, “How long do I think I’ll go, before I will refinance?” Let’s say you say 6 years. Then, look at the spreadsheet and compare the 6-year outlook. Which of the loans will save you the greatest amount of money? Look at the “P+I” column, which represents your monthly payment (not including any escrow payments you might have to make). Can you afford the mortgage?
7. The chance is very great that the best loan for you is an online company you’ve found, like eloan. Take that data into your local outfit, whether mortgage broker or bank, and give them an opportunity to match. They have many tools at their disposal, and you might be surprised at what they can do - if they really want your business.
8. If you do get your local outfit to give you a better deal, get a HUD and put the information in the spreadsheet to keep them honest and make sure it’s the best decision for you.
9. Finally, make a decision and lock in a rate. Close your mortgage as you normally would. However, make sure you keep your spreadsheet and data handy, because you’ll want to us it to verify your closing documents and final HUD. Don’t let anyone change the numbers on you. Steadfastly stick to the data in the spreadsheet. It will never steer you wrong.

If you follow the steps above, you will save yourself hundreds of dollars EACH AND EVERY MONTH, and you will save yourself a hundred-thousand dollars over the lifetime of the loan (depending on the loan amount, of course).

The pictures above are snapshots of the spreadsheet (If you click on those snapshots, a larger picture display so you can really get a look at the spreadsheet). Each row represents a loan. I’ve inserted 6 example loans, so you can see how this works. The empty cells are where you put your fresh information in. There are two main areas for each loan. The first area (represented by pink and blue cells) are where you put the loan information in. Pink represents required information, while blue is optional information. The second area (represented by white cells) are the areas where the spreadsheet works its magic: It calculates all the principle, payment and interest information. The most important area is under “Total Savings in the Given Year.” If I didn’t think I will refinance again until 6 years from now, I would want to know “If I go with loan X, will I save money or loose money in 6 years?”

The way I answer this, is find my “baseline” loan (you know, the loan I would probably do because I’m completely lost and confused, and think it “feels good” and I’m anxious to just make a decision and move on with my life). I put that “baseline” loan information on the line that says “Baseline Loan”. Now, I look at the information presented for the other loans that I’ve researched. I look to see how much money I would save - or loose - if I go with a loan other than the baseline.

To be crystal clear: The loan that has positive (i.e. black) numbers in the “6 Year Savings” column, that loan is better than my baseline loan (remember that I was using 6 years as an example - if you think you’ll move in 4 years, use that column). Likewise, if the loan I’m comparing to baseline has negative (i.e. red) numbers in the “6 Year Savings” column, that loan will leave me in a worse-off position than my baseline loan.

So, again, take a deep breath and plunge in. Use the examples I’ve included as a guide. If you do it right, this spreadsheet will tell you your closing cost, monthly payments and interest expense to the penny. Good luck!

Typical Key Terms on Large-Scale Software Contracts

Reviewing a software contract, or just wondering what the key terms of such a contract might include? I had the opportunity to prepare a high-level punch list for a large software deal, that involved a software vendor pushing out software to a large franchise. This makes things complicated, given you have to contract with both the franchiser and the individual franchisees.

The punch list I used is as follows:

• Products & Services of Deal – Define specifically what is being purchased. Include Quantity and version(s) of software. Update privileges (i.e. for how long and how much?). Training specifics. Level of other party’s involvement on implementation and rollout.
• Incorporation by Reference of Support Contract. Provide as attachment. Make sure you define the level of support and service levels, if any. Make that a separate agreement.
• Parties to the Contract – Who is ultimately responsible for paying bills and enforcing the contract??!? Need to think this through. Are the individual locations franchisees or a combination of corporate and franchise locations? If so, need to require the main corporate entity to enforce relevant terms of THIS contract on franchisees, so you have someone to sue if a franchisee decides to make copies of your software (for example).
• Overall Requirements – What specific requirements do you have to make this deal work? For example, must all locations have an Internet connection? An IT person? A firewall? Specific versions of the OS, Computers or other needs? A form they fill out? Must the main corporate entity approve all change requests and/or new locations?
• General Procedures – Who at the other party contacts you? Need to make sure you receive VALID requests (i.e. something the corporate client cannot dispute):
  • How are you notified of a new locations and/or franchisees?
  • How do you want individual locations to contact your support team? Should they go through the corporate IT department first?
  • How are change requests dealt with?
• Pricing and Payment Terms & Schedule – Down payments, installment payments and/or payment schedule, contingencies, penalties for non-payment / delayed payment, etc. Does the price depend on a certain number of units purchased within some time frame?
• Ad Hoc Services and/or Development
  • Procedures – Requesting, approvals, testing, rollouts, warranties / support, etc
  • Conditions – Must every location incorporate a development change to maintain standard software versions throughout? What happens if one or more locations don’t follow the rules? What other conditions do you need to make this manageable and profitable?
  • Defect Resolution – What is your response-time to alleged bugs? (I have an excellent procedure and system for this, if you’re interested. Let me know. Worked well when I was a consultant managing large software development deals).
  • Other stuff: fee schedules, ownership of work product, etc.
• Dispute Resolution – Procedure to resolve disputes between you and individual franchisees, as well as between you and the main franchiser.
• Termination – Under what conditions (if any), what happens, what is returned to you (i.e. equipment, money, software, etc?), potential money refunded, etc.
• Standard Contract Stuff – Limitation of Liability, Warranty, Indemnities, etc.

If you can answer these questions, from a business perspective, you’re quite far in your drafting of a contract. In drafting a contract, these questions need to be answered. Having them answered before you engage an attorney will help you save a significant amount of money.