TECHNOLOGY CONTRACTS GLOSSARY

California Labor Code Section 2870

A statute providing that an employee's inventions are not Assigned to the employer if they are developed entirely on the employee's own time, and without using the employer's equipment, supplies, facilities, or trade secret information. This does not apply, however, to inventions that either (1) relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee "as employee" of the employer. If an employment agreement with a California employee requires the employee to assign any invention, then the employer must also (at the time the agreement is made) provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of Section 2870. As a result, this notice generally appears in California Employee Invention Assignment & Confidentiality Agreements.

Carve-out

Lawyer jargon for an exception or loophole to a requirement. Some contract provisions may need one or more carve-outs to deal with special situations.

Choice of Forum Clause

The selection of a specific court to hear disputes concerning a contract. Though many technology contracts include a choice of forum clause, courts may override that choice due to public policy or other reasons.

Choice of Language Clause

For international transactions in which the agreement may be translated into other languages, the agreement may specify which language governs the interpretation of the agreement.

Choice of Law Clause

The selection by the parties in a contract of a particular country's and state's law to govern the interpretation of a contract. Lawyers prefer a specific choice of law in a contract so that the contract can be interpreted clearly. If the parties reside in the same Jurisdiction, and the contract does not have a choice of law clause, then the law where the parties reside will probably apply. If the parties reside in different Jurisdictions, then potentially two different laws (e.g., law of California and law of France) may apply, which may require two different lawyers for an interpretation.

Clickwrap

A type of online agreement in which the user clicks an "I Accept" button or similar mechanism to accept and complete the Formation of Contract. It is typically not negotiable.

Commercial Availability

The date on which a product is available in production form for sale or license to the public. Contrast this with Alpha and Beta releases, which mostly are made to a limited audience of "beta testers," although more and more beta releases are made to the general public. Also called General Availability.

Communications Decency Act (CDA)

Section 230 of the Communications Decency Act, 47 United States Code Section 230, protects internet content providers from legal liability (such as Defamation claims) for third-party materials that they publish online, as well as for liability due to filtering content. It is an important protection to online publishers of User Generated Content.

Confidentiality Agreement

See Non-Disclosure Agreement.

Conformity (to a Specification)

The standard generally used for Acceptance of work product under an Independent Contractor Agreement, Software Development Agreement or similar agreement. The work product needs to "conform" or meet the Acceptance requirements, which are usually written up as a Specification or requirements document. Although some agreements use a standard of "strict" conformity, it is more common to use a standard of "substantial" conformity to the Specification. This is to prevent the parties from getting stuck on minor details.

Consequential Damages

Damages that arise as an indirect result (as a "consequence") of an act. For example, the failure to deliver a part to a factory for manufacturing could be a direct act and could result in direct Damages. Shutting down the factory because there are no parts in inventory is a consequential damage resulting from the failure to deliver the part. California Commercial Code Section 2719(b)(3) permits the exclusion of consequential damages in most sales contracts. Consequential damages are routinely waived in technology contracts, with a few common exceptions, using a Consequential Damages Waiver.

Consequential Damages Waiver

Many contracts include an exclusion or waiver by one or both parties of Consequential Damages, although such a waiver may contain exceptions. Such a waiver might read as follows: "IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO LOST REVENUES, LOST PROFITS, AND/OR LOST SAVINGS, IN CONNECTION WITH THIS AGREEMENT, EVEN IF THE OTHER PARTY HAS BEEN INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. "

Consideration

All contracts require the exchange of consideration, i.e., something of value, in order to be legally effective, subject to very few exceptions. This requirement appears in many contracts with the language, "for one dollar and other good and valuable consideration, the receipt of which is hereby acknowledged." Although some consideration is required, the actual amount of consideration can be very small, as small as a "peppercorn," according to law treatises. Even an exchange of mutual Covenants can be sufficient consideration. See also Formation of Contract.

Conspicuous (disclaimer in contracts)

Under California Commercial Code Section 1201(b)(10), "’Conspicuous,’ with reference to a term, means so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it. Whether a term is ‘conspicuous’ or not is a decision for the court. Conspicuous terms include the following: (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.” This is the reason why some contract language and other legal disclaimers are in all caps type. As one blogger put it, we have “a terrible typographic decision enshrined in the conventional wisdom of legal documents because it fits within the safe harbor defined by a widely used statute.”

Consulting Agreement

See Independent Contractor Agreement, which shares many of the same issues and features.

Copyright

A type of Intellectual Property right that protects the "expression" of an idea that is "fixed in a tangible medium." In plain language, this means words on paper, songs recorded on a compact disc or .mp3 file, paintings on canvas, code written in a programming language stored on a hard disk, or motion pictures on film or DVD's, and so forth. For example, the words are the expression, and the paper is the tangible medium.

Copyright Notice

The legal notice that a Work is subject to Copyright protection. Since the U.S. joined the Berne Convention, a Copyright notice is no longer required in order to preserve a Copyright for Works published after March 1, 1989. However, use of a copyright notice still imparts many useful legal benefits. For details, see U.S. Copyright Office, Circular 1.

Counterparts

(1) In contracts, counterparts means copies of the same signature page signed separately by different parties. For example, if three parties are not present to sign the same signature page, each party can sign copies of the signature page and exchange those with other parties. Each signed page is a "counterpart" copy. Contracts, particularly more complicated ones, often include a "counterparts clause" that might read as follows: "This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument." (2) In prosecution of Patents and Trademark registrations, a "foreign counterpart" means an application to register the same rights in a different Jurisdiction. For example, a U.S. Patent application may have foreign counterpart applications in Japan and Canada.

Covenant

A legally enforceable promise to act or not take action in the future.

Covenant Not to Sue

A Covenant that is essentially the same as a non-exclusive license to Intellectual Property, but unlike a license, is generally personal to the recipient of the covenant and not assignable by the recipient (See also Assignment and Delegation). Covenants Not to Sue are sometimes provided in patent transactions instead of non-exclusive Licenses. Also called a Non-Assertion Covenant.

Creative Commons

A non-profit organization that develops and provides forms of Open Content licenses and provides a means to dedicate Works to the Public Domain.

Cross-Collateralization

An approach by which amounts owed under one contract are repaid by amounts to be paid under a separate contract. This approach is used for multiple book contracts with the same author, for example. If an Advance against Royalties has not been Recouped for a book, the publisher may Recoup the Advance from Royalties to be paid under the contract for a second more profitable book.

Cross-Default

Treating a default (or Breach) under one contract as a default under a separate contract. This approach is often used in debt financing agreements. If a borrower under an agreement concerning its collateral for a loan breaches that agreement (e.g., sells an asset without the bank's permission), the default under that agreement is also deemed to be a default under the loan agreement, thereby enabling the bank to demand repayment of the loan. This concept is used sometimes in complex technology transactions where a breach of obligations in one agreement, such as a Maintenance and Support Agreement, also results in breach of another agreement, such as a License agreement, or triggers an action under another agreement, such as release of an escrow under a Source Code Escrow Agreement.

Cross-Indemnity

A type of Indemnity in which parties to an agreement provide an Indemnity to the other party(ies). For example, a Cross-Indemnity may be used in situations where each party is responsible for separate activities in a relationship (such as a joint venture) and that party wants to protect the other parties from any third-party lawsuits arising from those activities.

Cross-License

In one contract, the License by one party to the other, and vice versa. For example, in a Patent Cross-License, each party could Grant a License the other for its entire Patent portfolio. See also Patent Pool.

Cure (of contract Breach)

To perform or stop performing some action so that a party to a contract is no longer in Breach. Many contracts have a Cure Period. Some breaches may not be able to be cured, such as a false representation that the party was in compliance with law at the time the contract was signed.

Cure Period

The time period in a contract that a party in Breach has to Cure the Breach, after which the other party may terminate the contract.