Are Your Click-wrap Agreements Letting You Sleep Too Well?

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You are an innovator.  You work hard.  You are the first to get to the functioning platform of a genius new product.

But to make money on it, you have to share it, sell it and let people sample it.

Of course, you worry that someone could just copy it, steal it and reproduce it.

So, what do you do?  You let people use your program, but you make sure they sign an End User License Agreement (aka, click wrap agreement).  Right?  One of those onerous, fine print legal documents that sets out every disclaimer, threatens every punishment, wags every finger.

You now feel protected, right?  Sleeping soundly at night?

Well, you may be in for a rude awakening.  A federal court in California may be your wake-up bell!

Aqua Connects was a company like yours.  It created a genius software that allowed users remotely to access a Mac-based environment.  It was so genius that its competitors (like Code Rebel) noticed.  And then Code Rebel signed up for and downloaded Aqua Connects’ trial version of the software.  And liked it so much that, instead of purchasing the full version of the software from Aqua Connects, Code Rebel reverse engineered the software and made its own version!

When Aqua Connects discovered this, they felt confident.  They sent their End User License Agreement to their lawyer and then they sent their lawyer to file a lawsuit.  The lawsuit was very specific and alleged an acute example of trade secret misappropriation.   There was no denying that Code Rebel did the very thing that Aqua Connects accused it of doing.

And yet.  Aqua Connects’ lawsuit was thrown out of court!  Why?  Because trade secret misappropriation can only occur if the trade secrets were misappropriated.  And the Trade Secrets Act expressly states that reverse engineering of a trade secret, without any further evidence of improper access to or acquisition of the trade secret, is NOT misappropriation under the Act.

So, do you still feel protected by your imposing and air-tight click wrap agreement?

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ervin Cohen & Jessup LLP | Attorney Advertising

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