Conflicts in IT business. How lawyers can help?
Every sphere of business has its own characteristics and its distinctive features. If we talk about the IT business, then, on the one hand, it is absolutely precisely associated with large investments and company turnover, serious market players and quite a lot of competition. On the other hand, the IT business in many cases is still very informal and trusting because the IT employees themselves used to work under the informal and trusting principles.
One of the most frequent situations is next: parties agreed on everything verbally, shook hands, the IT-guy signed the contract without looking at it and after a while he receives a request to pay a fine of several thousand or several tens of thousands of dollars because he violated the confidentiality/personal data protection/non-compete obligations etc. Why it happens? Because it’s not a secret for anyone that IT-guys, first of all, think about how to write code or fix a bug, and at the very last how to arrange this process in a way to make it legally correct.
Because of that we decided to describe the most common conflict situations in the IT business sphere and show you how a qualified lawyer can help you in every particular situation.
What conflict situations are the most frequent?
Speaking of our company’s and employees’ experience and of the situation of market in general, the most frequent conflict situations are:
- Breach of confidentiality. It is used to say that Confidentiality is the staff of life. Broadly speaking, confidentiality regime does not allow not only to disclose the amount of payment for your services to the public, but even to mention cooperation with a client or work on projects in social networks/in CV. You may not have the right to tell your friends or family about how the system of getting into the office is constructed, where the office is located, how you receive tasks from the client, why you complete them, etc. Quite harsh rules, aren`t they?
Usually, agreement with the client or a separate NDA contains the obligations of parties in this regard and establishes penalties for their violation. Everyone always likes to write very impressive fines, namely about 20,000 or 30,000 USD. They are doing so to frighten the client/contractor and, if it will be necessary, compensate the possible losses in more-than-enough amount.
- Breach of non-compete provisions. Employees is all-important, especially if they are highly-qualified, know the company internals and company’s competitors would like to hunt them. Let`s imagine the situation: You are working with client as a private entrepreneur and receiving good bucks. But suddenly, a big international company contacts you and says that you is exactly the one they need because you have a huge experience in the sphere this company needs (and you are much cheaper than American IT-specialists, but let`s not talk about that now). To finalize you interest in their offer, company is ready to pay you 3 times more than the market requires. Thus, you are happily starting working with this company, and in a month you receive a claim from your former client for a several tens of thousands of dollars.
What was it? The thing is that most of the sample IT services agreements contain a clause regarding a prohibition to work with the companies who are the direct or potential competitors of the customer or whose goods/services may compete with the goods/services of the customer. Therefore, a very attractive job offer may result in the massive penalties as minimum or the loss of business reputation as maximum.
- Breach of payment procedure under the Agreement and penalties. Business if a hard craftsmanship and sometimes you have to turn a blind eye to small payment or documents provision delays etc. However, lets simulate the following situation: you provided client with the completed work but client rejected to accept it and requested the revision. Then again. And again. After the 3rd revision you decided to take a firm stand and requested to proceed with the payment for already completed work. If client don’t, you refuse to conduct further revisions.
Thereafter, unexpectedly, instead of the apologies and payments, the client informs you that he/she is not obliged to pay anything, that you actually have not done the work. Moreover, he/she decided to terminate the agreement and takes all the Deliverables the rights to which also belong to him/her and which, in fact, comprise the 90% of the final product. Such situation is very common in business practice because the client usually drafts all the Agreement provisions in its favour. Consequently, client is absolutely entitled to take such a stand.
Speaking of penalties, they may be settled for any actions except as restricted under the laws (spoiler – the restrictions are few). Likewise, penalties in IT sphere are usually the big ones. Client is entitled to demand a penalty if you told the friends about your job, provided the completed task at 0:10 a.m. when the deadline is midnight or provided the task that was considered by client as improper etc. or is you did lots of other things. Claims in these regards are day-to-day practice.
- Intellectual Property disputes. Matters regarding the intellectual property and rights to it that arise during the completion of tasks and creating products constitute the whole separate field of discussion. It seems to be a well-known fact that you have website/software etc. intellectual property rights if you created it because you are the author (creator). Likewise, it is prohibited to violate the intellectual property rights of other persons as it is prohibited by laws and you could be punished. Of course, you can transfer your intellectual property rights to the client for consideration or include such consideration in the total cost of services under the Agreement by raising the hourly rate etc. So, it would seem as a very correct wording because matters related to intellectual property have a lot of pitfalls that usually are not taken into account by many IT specialists.
For example, during creating of your code you used a piece of the code taken from the public domain website. It is completely legal, isn`t it? Another situation: you used the software available at open access to develop a program. It is legal to use software if it is available at open access, isn’t it? Another situation: you used several materials provided by the client during developing a website. But anyway, you have all the rights to this website because you did all the job, haven’t you? Or maybe client has all the rights to the website because you based your job on the materials he\she provided? Another situation: during the website creation work you used your personal, universal, created-at-home piece of code. So, you cannot use this piece of code to create other programs, can you? Contact a lawyer to receive the correct answers to all these questions.
- Manipulations. This method is as old as time but still remains popular. Earlier, people used to call it snatch. Today they use to call it manipulations. Anyway, try to benefit from a lack of awareness or education of the counterparty has always been and always will be an effective method. Often you can see a situation when company largely invoices IT specialist for onboarding services (education, involvement of specialists to provide his\her work etc.) if he\she terminates the Agreement ahead of time. Likewise, company may reject to pay you because it considers that you billed more hours for completion of tasks then you spent in real and therefore, you also have to decently remedy the company for such a “fraud”. Such situations are especially often encountered during cooperation with small companies, in fact, many IT specialists usually choose exactly such companies as their employers.
This list is only a general review of the most common conflict situations. As you see, issues may follow you everywhere.
How to beat the odds if you faced conflict situations?
In general, the methods provided hereunder may be considered by many as obvious and simple. But for some reasons many people forget to apply them or consider them as ticking boxes. The reason for this behavior is a mystery much greater than the one behind Nazca Lines. Therefore, we insist you to follow these methods everywhere and always.
Preparation. Sun Tzu (VI century BC) for reason said that war is won before it begins. Roman being the smart men used to say “If you want peace, prepare for war”. Preparation in business relationships is 80% success. It has to consist of the negotiations with the company regarding all the matters of your interest, correct signing of the agreement and appeal to lawyers with a request to analyze the provided agreement for possible risks. If you miss at least one of these points then your cooperation may end without starting or may start and end up pretty disastrous after some time.
Read what you are signing. This is another truism that is always forgotten. If you started to read the agreement right before its signing and after few minutes the HR starts to fasten you because she “has a lot of things to do”, you should sit where you have sat and read what you have read. Read the agreement before its signing is a golden rule. Often there are the situations when parties agreed on the version of the agreement that largely differs from the original version but the customer brings the original version of the agreement without amendments for signing. Why is this done? Simply because the original version of the agreement is more profitable for customer and he\she expects that you will not read the agreement.
Negotiations. It may sound weird from the law firm but you should not hurry to file a lawsuit regarding the conflict situation. Strong side of the IT business is that you may settle almost all the conflict situations through negotiations. It is faster, cheaper, easier and more conveniently. Everything is handled online with the immediate feedback so you do not have to wait case hearings for months. At the same time, any negotiations may come to the deadlock. If happened so and taking aside all the emotional feelings you are sure that you are right, then you should file a lawsuit to stop conflict here. In case of filing a lawsuit previous negotiations will work in your favor showing your bona fides. However, you need to be careful not to conduct the negotiations for so long as to skip the limitation period for claim and literary be late to court.
So, why should you contact the lawyers?
During the reading of all three points provided above you may have a question: “How should I know if I understand my rights correctly and what is writer in the agreement?”. The answer is you need to be a specialist. In this regard, the specialists are lawyers. For example:
- Is it possible without breaking the law to told about cooperation with your past client 1 year after the termination of cooperation?
- Is it legal to work with several clients simultaneously or start working with your client’s competitor?
- How to legally use the open source materials?
- How to receive remuneration for completed work if you with your own hand signed the agreement saying you receive remuneration only for delivered work?
- How to determine whether client’s claim is legal or it is just the attempt to intimidate you without any legal ground etc.?
Lawyers know answers to all these questions. Every work has to be done by the specialist. Baker has to bake pies, security officer has to watch a small TV at shift and lawyer has to read agreements for you and represent your interests in conflict situations. Therefore, we recommend you to focus on your work and provide lawyers with the opportunity to help you with legal issues.
Lyaskivskij Ivan
Senior IT lawyer