In The News

Music & Margaritas: Preview Party for Conexion Americas' Annual Breakfast

How lucky was it to stumble upon the first night of incredible weather in early April when we held a garden party kicking off the annual breakfast for my favorite non-profit in town Conexion Americas?

We called it "Music & Margaritas."

Everyone expected a good margarita and some great conversation, but no one expected to hear "Rumba," the number one band in Nashville's corporate band challenge, hosted by the Arts & Business Council!  When my friend Leon said he would take care of the music, we thought he meant he and another guy would bring their guitars, but he showed up with an entire Latino rock band.  Incredible.

Conexion Americas serves as a bridge between the established community in Nashville and the recently-arriving Latino community.  Its mission is to promote the social, economic and civic advancement of Latino families in Middle Tennessee.  It was a great chance for friends to learn about the amazing work of Conexion Americas, and a great opportunity for Conexion Americas to make some new friends.

Mark your calendars for the annual breakfast on May 26 at 7:30am at Loews Vanderbilt!

Here are some photos from Music & Margaritas:











Want to Limit Liability Against Copyright Infringement Claims when Hosting User Content on your Website?

If you host a website that invites the public to submit content, often called UGC (or User Generated Content), you may want to read the recent summary judgment decision in Arista Records LLC v. Myxer Inc. and stay tuned to the final outcome at trial.  Website hosts that allow UGC run the risk of being sued for copyright infringement, among other claims, because users sometimes submit material whose copyright belongs to someone else.  If a copyright owner sues you for copyright infringement in your role as a website host, one of the most common defenses asserted is that the web hosting is protected under the DMCA (Digital Millennium Copyright Act). 

On April 1, 2011, a federal court in California issued the above decision in a case pitting content owners against website hosts.  UMG Records and other music companies sued Myxer and its principals for copyright infringement because Myxer hosts a website that invites the public to upload music and then download it as ring tones on cell phones.  Myxer doesn't pay UMG anything, and UMG argues that it loses money every time a ring tone is downloaded through Myxer.

Myxer asserted two primary defenses: that its use was fair use and that it was protected by the DMCA's "safe harbors."  On summary judgment, the court rejected Myxer's fair use defense, finding that converting the songs into ring tones did not qualify as a "transformative" use and finding that Myxer's business model likely cut into UMG's market. 

But the court kept alive Myxer's DMCA defense.  It found that genuine issues of fact existed regarding Myxer's implementation of a DMCA policy and regarding the speed with which it removed allegedly infringing material.  Now it will be up to Myxer to prevail on this defense at trial.

Just like Myxer is hoping to do, businesses that allow the public to post content on their websites may limit their liability against copyright infringement lawsuits by following some steps under the DMCA.  As a ground rule, if you create or direct content on your website that infringes on another's copyright, you can't turn to the DMCA for help.  But if all you do is host content created by others, to get the benefits of DMCA protection you need to (1) adopt a  DMCA policy and communicate it to your users, (2) appoint a DMCA agent, (3) follow the DMCA steps of quickly responding to accusations of hosting material that infringes another's copyright, (4) permanently remove repeat infringers, and (5) receive no financial benefit directly attributable to any infringing activity on your site. 

To read more about how to protect your business under the DMCA, check out this great resource from the EFF (Electronic Frontier Foundation), or contact an attorney with experience in copyrights and intellectual property law.

Griffin Technology Hosts WaterCooler

WaterCooler is a monthly networking event for "young" entrepreneurs.  (I take liberty with use of the word "young" since my co-founder and I are pushing 40, and since we'd like to stay involved for a while.  With that in mind, we include anyone in their 20s, 30s and 40s.)  We started this fun venture in September 2009 and highlight a different local business or expert each time.  Lately we've been enjoying the field trips, visiting Yazoo Brewery, Olive & Sinclair Chocolate Co., and (coming up on April 18) Corsair Distillery.  It's a casual way to meet others who are active in the business, cultural and philanthropic worlds of Nashville.  Hopefully connections will be made at WaterCooler that spur new entrepreneurial and community collaborations. Griffin Technology graciously hosted us on April 23.  Jackie Ballinger, its Marketing and PR guru, welcomed each guest and provided us with an incredible array of food and drink.  Also greeting guests as they arrived was this VW bus, which employees use for impromptu meetings, and which Griffin has traveled in for marketing at SXSW and Bonnaroo, to name a few:
Photo courtesy of Griffin Technology

Mark Rowan, Griffin's President, spoke about its background, its international reach and its commitment to Nashville.
Photo courtesy of Griffin Technology

It was clear that Griffin is a dominant player in the global tech scene, and we're lucky to have it right here in our own backyard.

After, Jackie led us on a tour of their new work space.  We saw the wall of awesome accessory covers, the vending machine stocked with beer, and the work station decked out in action figures -- none of which is a regular feature where most of us work:



In the highest form of flattery (jealousy), everyone decided to ditch their current job and apply to work at Griffin.

Here are some photos of the event:









Two Easy Ways Social Media Experts can Improve Philanthropy

Many people are ashamed of their birthdays, ashamed of growing older.  Not my mom -- she's lived a rich life and dedicated it to serving others.  We're having a birthday party for her soon, and 40 or 50 friends will be there to help her celebrate.  That's because she's given of herself and made deep connections in her community.  Happy birthday, Mom!  My mother,  my father and countless others are examples of how selfless acts of community involvement provide unbelievable personal returns. I had lunch yesterday with the Head of Cabedge himself, Chris Blanz.  (That's the best job title I've ever seen!)  We had a lot of fun and let a ton of ideas fly all around the room.  One of the best issues we discussed was: "How can social media experts/users get involved in the philanthropy of our city?"  Here's two easy ways:1.  Use social media to spread the word about non-profits.  You do this all day every day about other topics, any way.  For many of you, social media is your job.  Find those non-profits in town that interest you, follow them, and help spread the word about their events and needs.  Big fundraiser coming up?  Think of how many extra people might attend all because you tweet about it.  Cool People Care has a great resource that lets you follow and friend your favorite non-profits.  Facebook has a Causes app to raise funds and awareness of your favorite charities, and SixDegrees.org lets you place donation links on your social networks that directs funds to the charity of your choice.  Easy stuff.  Big results.

2.  Join the board/volunteer your skills with a non-profit.  This is where face-to-face human interaction is invaluable.  Here in Nashville I'm on the board of an organization that I love, where the time I spend feels like sheer fun: Conexion Americas, which serves as a bridge between the recently arriving Latino community and the community of people who have been here a while.  Every non-profit needs help from social media experts to help build bridges to the people they serve and to funders, friends and decision-makers.  These boards need your expertise.  Choose one that interests you.  Don't have any experience on a board?  Then call the CEO and say you want to volunteer for a year.  I promise they'll plug you in.  If you're under 40, apply for the Young Leaders program, which trains you how to sit on a board.  Or contact Hands On Nashville, which offers similar classes.

Two Easy Ways Social Media Experts can Improve Philanthropy

Many people are ashamed of their birthdays, ashamed of growing older.  Not my mom -- she's lived a rich life and dedicated it to serving others.  We're having a birthday party for her soon, and 40 or 50 friends will be there to help her celebrate.  That's because she's given of herself and made deep connections in her community.  Happy birthday, Mom!  My mother,  my father and countless others are examples of how selfless acts of community involvement provide unbelievable personal returns. I had lunch yesterday with the Head of Cabedge himself, Chris Blanz.  (That's the best job title I've ever seen!)  We had a lot of fun and let a ton of ideas fly all around the room.  One of the best issues we discussed was: "How can social media experts/users get involved in the philanthropy of our city?"  Here's two easy ways:1.  Use social media to spread the word about non-profits.  You do this all day every day about other topics, any way.  For many of you, social media is your job.  Find those non-profits in town that interest you, follow them, and help spread the word about their events and needs.  Big fundraiser coming up?  Think of how many extra people might attend all because you tweet about it.  Cool People Care has a great resource that lets you follow and friend your favorite non-profits.  Facebook has a Causes app to raise funds and awareness of your favorite charities, and SixDegrees.org lets you place donation links on your social networks that directs funds to the charity of your choice.  Easy stuff.  Big results.

2.  Join the board/volunteer your skills with a non-profit.  This is where face-to-face human interaction is invaluable.  Here in Nashville I'm on the board of an organization that I love, where the time I spend feels like sheer fun: Conexion Americas, which serves as a bridge between the recently arriving Latino community and the community of people who have been here a while.  Every non-profit needs help from social media experts to help build bridges to the people they serve and to funders, friends and decision-makers.  These boards need your expertise.  Choose one that interests you.  Don't have any experience on a board?  Then call the CEO and say you want to volunteer for a year.  I promise they'll plug you in.  If you're under 40, apply for the Young Leaders program, which trains you how to sit on a board.  Or contact Hands On Nashville, which offers similar classes.

It Takes only one Expletive in a Tweet to Lose your Job

Chrysler did exactly what it should have done: immediately terminated its relationship with its social media agency New Media Strategies after the agency used the F-Bomb in a tweet on Chrysler's behalf.  Here's the tweet (with my redactions): "“I find it ironic that Detroit is known as the #motorcity and yet no one here knows how to f****** drive.”  Even more ironic is that Eminem (who cusses like a sailor) is Chrysler's new spokesman.  (Props to him for an awesome Superbowl ad!)  Still, this was not exactly the image Chrysler was going for. As reported in Automotive News, the social media agency immediately fired the employee.  And Chrysler is ending its relationship with the agency on account of the tweet.  No surprise here on either move. Michael Humphreys said it best in his Forbes blog: "Twitter is not a private room.  It's not a quiet corner in a public square.  It is THE public square."

It Takes only one Expletive in a Tweet to Lose your Job

Chrysler did exactly what it should have done: immediately terminated its relationship with its social media agency New Media Strategies after the agency used the F-Bomb in a tweet on Chrysler's behalf.  Here's the tweet (with my redactions): "“I find it ironic that Detroit is known as the #motorcity and yet no one here knows how to f****** drive.”  Even more ironic is that Eminem (who cusses like a sailor) is Chrysler's new spokesman.  (Props to him for an awesome Superbowl ad!)  Still, this was not exactly the image Chrysler was going for. As reported in Automotive News, the social media agency immediately fired the employee.  And Chrysler is ending its relationship with the agency on account of the tweet.  No surprise here on either move. Michael Humphreys said it best in his Forbes blog: "Twitter is not a private room.  It's not a quiet corner in a public square.  It is THE public square."

Opportunities Abound at PodCamp Nashville

PodCamp Nashville used to be a best-kept secret.  Not any more. If you're want to find your voice and find your audience, if you want to build your brand and link to potential customers throughout the world, if you want to speak your mind by creating online documentaries or podcasts, or if you want to meet other people interested in your world and your community, sign up.  PodCamp Nashville will be held downtown at Cadillac Ranch on Saturday, March 26.  And it's Free. People from all industries and skill-sets (and I mean All) will be there.  Over 400 have signed up to attend so far.There's no doubt that PodCamp is a chance to network.  I got introduced to PodCamp and its sister, BarCamp (held in the fall), through a friend at work. I've met some incredible Nashvillians in the music, entertainment, marketing, technology and digital fields; made some good friends; and developed some clients.

But more than that, it's a chance to learn from some of the best and brightest in our community.  Where else can you hear all these great luminaries under one roof?  Kate O'Neill will talk about how blogging made her a better leader; Courtenay Rogers will talk about "The Power of Digital Stalking," (she says we all do it); Jake Jorgovan will discuss "How to Effectively Utilize YouTube."  And I'm excited to hear Raj Menon talk about how to launch a podcast.

I can't wait to hear David Corrigan explain how to "Mak[e] your Mobile App idea a Reality."  I came up with about 20 ideas the other day on my drive into work (I'm sure 15 of them have already been invented), but I'm eager to hear what to do the next time creativity hits!

As one of the only lawyers speaking that day, I'll be leading a session with marketing guru Taylor Vick.  She and I are teaming up to talk about how businesses can accomplish their marketing goals through social media without running into trouble.  When clients come to me with a crisis involving online communications, it often takes a tag-team approach between legal solutions and SEO know-how.  Taylor and I will use some specific case-studies to frame our discussion, highlight the issues that can help businesses and bloggers avoid liability, and give some pointers along the way.  Quoting Shakespeare, we titled our session: "Kill All the Lawyers: The Legal & Marketing Aspects of Using Social Media."  We'd love to have you join us and add to the conversation.

Spread the word.  And sign up!

Opportunities Abound at PodCamp Nashville

PodCamp Nashville used to be a best-kept secret.  Not any more. If you're want to find your voice and find your audience, if you want to build your brand and link to potential customers throughout the world, if you want to speak your mind by creating online documentaries or podcasts, or if you want to meet other people interested in your world and your community, sign up.  PodCamp Nashville will be held downtown at Cadillac Ranch on Saturday, March 26.  And it's Free. People from all industries and skill-sets (and I mean All) will be there.  Over 400 have signed up to attend so far.There's no doubt that PodCamp is a chance to network.  I got introduced to PodCamp and its sister, BarCamp (held in the fall), through a friend at work. I've met some incredible Nashvillians in the music, entertainment, marketing, technology and digital fields; made some good friends; and developed some clients.

But more than that, it's a chance to learn from some of the best and brightest in our community.  Where else can you hear all these great luminaries under one roof?  Kate O'Neill will talk about how blogging made her a better leader; Courtenay Rogers will talk about "The Power of Digital Stalking," (she says we all do it); Jake Jorgovan will discuss "How to Effectively Utilize YouTube."  And I'm excited to hear Raj Menon talk about how to launch a podcast.

I can't wait to hear David Corrigan explain how to "Mak[e] your Mobile App idea a Reality."  I came up with about 20 ideas the other day on my drive into work (I'm sure 15 of them have already been invented), but I'm eager to hear what to do the next time creativity hits!

As one of the only lawyers speaking that day, I'll be leading a session with marketing guru Taylor Vick.  She and I are teaming up to talk about how businesses can accomplish their marketing goals through social media without running into trouble.  When clients come to me with a crisis involving online communications, it often takes a tag-team approach between legal solutions and SEO know-how.  Taylor and I will use some specific case-studies to frame our discussion, highlight the issues that can help businesses and bloggers avoid liability, and give some pointers along the way.  Quoting Shakespeare, we titled our session: "Kill All the Lawyers: The Legal & Marketing Aspects of Using Social Media."  We'd love to have you join us and add to the conversation.

Spread the word.  And sign up!

Video of Recent Presentation on Legal Issues in Social Media

In late January, Indie Connect asked me to speak with professionals in the music industry about the pressing legal issues in social media.  It was an honor being with them.  They were kind enough to capture a video of the presentation, which you can watch here.If you'd like me to come speak about Social Media Law with your business or group, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Last week I spoke on social media legal issues to the Tennessee Bar Association.  Yesterday, the Nashville Business Journal selected me to be one of four panelists at an upcoming presentation on social media to the business community.  And in late March, I'll be co-presenting with Taylor Vick of Point3 Media on the collaboration needed in social media between legal and marketing; we'll be at PodCamp in Nashville.  Our title is "Kill All the Lawyers: Marketing through Social Media the Legal Way."  Sign up to attend -- it's free, and there will be incredible sessions on social media all day long.

Video of Recent Presentation on Legal Issues in Social Media

In late January, Indie Connect asked me to speak with professionals in the music industry about the pressing legal issues in social media.  It was an honor being with them.  They were kind enough to capture a video of the presentation, which you can watch here.If you'd like me to come speak about Social Media Law with your business or group, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Last week I spoke on social media legal issues to the Tennessee Bar Association.  Yesterday, the Nashville Business Journal selected me to be one of four panelists at an upcoming presentation on social media to the business community.  And in late March, I'll be co-presenting with Taylor Vick of Point3 Media on the collaboration needed in social media between legal and marketing; we'll be at PodCamp in Nashville.  Our title is "Kill All the Lawyers: Marketing through Social Media the Legal Way."  Sign up to attend -- it's free, and there will be incredible sessions on social media all day long.

Best Practices for Businesses: Tip #1: Adopt a Social Media Policy

According to a February 14, 2011 article on Mashable.com "social media is predicted to see one of the biggest increases in online marketing spending this year."  With that in mind, businesses need to adopt and implement a social media policy.  In fact, they should implement two policies: one for all employees, and another for those employees responsible for official social media communications on behalf of the business. Some businesses may say that there's no need to have a social media policy because they aren't officially engaged in social media.  Even if a business doesn't officially participate in social media, you can bet its employees are on Facebook or Twitter.  They're definitely using social media after work, but probably using it during working hours, too.  Their unofficial use of social media makes it important for businesses to set some guidelines.Businesses should consider adopting two separate policies:1.  A social media policy for ALL employees.  Businesses should provide all employees general guidelines on certain matters, for example: keeping business matters confidential, affirming that employees should have no expectation of privacy for anything posted on a publicly-accessible site, and reminding employees that they should clarify that any opinion expressed is made in their individual capacity, not on behalf of their employer.  In light of a recent NLRB settlement with a Connecticut ambulance company who disciplined an employee for making negative comments about her employer on Facebook, businesses should be very reluctant to limit employees' right to discuss the terms of their employment (like wages and conditions).  Businesses should adopt this policy even if they do not officially engage in social media as a company.2.  A policy for employees responsible for official social media communications of the business.  Those employees responsible for communicating on behalf of the company through social media need guidelines.  They need to know what is acceptable language, how to respond to negative reviews of the business, and their responsibilities when inviting user generated content.  There are laws governing marketing to minors and regulations requiring disclosure of any material connection between a blogger and a business.  These are just a few of the items a business should consider when crafting its social media policy.

Best Practices for Businesses: Tip #1: Adopt a Social Media Policy

According to a February 14, 2011 article on Mashable.com "social media is predicted to see one of the biggest increases in online marketing spending this year."  With that in mind, businesses need to adopt and implement a social media policy.  In fact, they should implement two policies: one for all employees, and another for those employees responsible for official social media communications on behalf of the business. Some businesses may say that there's no need to have a social media policy because they aren't officially engaged in social media.  Even if a business doesn't officially participate in social media, you can bet its employees are on Facebook or Twitter.  They're definitely using social media after work, but probably using it during working hours, too.  Their unofficial use of social media makes it important for businesses to set some guidelines.Businesses should consider adopting two separate policies:1.  A social media policy for ALL employees.  Businesses should provide all employees general guidelines on certain matters, for example: keeping business matters confidential, affirming that employees should have no expectation of privacy for anything posted on a publicly-accessible site, and reminding employees that they should clarify that any opinion expressed is made in their individual capacity, not on behalf of their employer.  In light of a recent NLRB settlement with a Connecticut ambulance company who disciplined an employee for making negative comments about her employer on Facebook, businesses should be very reluctant to limit employees' right to discuss the terms of their employment (like wages and conditions).  Businesses should adopt this policy even if they do not officially engage in social media as a company.2.  A policy for employees responsible for official social media communications of the business.  Those employees responsible for communicating on behalf of the company through social media need guidelines.  They need to know what is acceptable language, how to respond to negative reviews of the business, and their responsibilities when inviting user generated content.  There are laws governing marketing to minors and regulations requiring disclosure of any material connection between a blogger and a business.  These are just a few of the items a business should consider when crafting its social media policy.

Olive and Sinclair's Experience: Secrets to Success for Any Business

On January 31, 2011, I sat down to talk with Scott Witherow, owner of Olive and Sinclair Chocolate Co. , which makes the South's best chocolate.
 
Olive & Sinclair’s Exclusive with Williams-SonomaOlive & Sinclair’s Exclusive with Williams-Sonoma
Later that night, he hosted WaterCooler, a monthly networking event for young entrepreneurs that some friends and I co-founded in August 2009.  We had a jam-packed crowd of over 40 people.  Everyone, it seems, wants to learn more about this company.  (For another great write-up on the tasting, check out the recent post on Nashville Foodies' blog, or see Gwyneth Paltrow's blog "Goop," which highlighted O&S.)

Begun just 13 months ago in September 2009, Olive and Sinclair’s growth has been as viral as a posting on Facebook or Twitter.  O&S has already gained an exclusive contract with Williams-Sonoma for some of its products, and the demand for its chocolate grows every day.

We met after work at the office of O&S, which doubles as factory, research and design center, marketing headquarters, and nerve-center for all things chocolate in Nashville.  Before everyone from WaterCooler arrived, Scott offered me a sneak-preview sample of an upcoming chocolate he plans to launch in the coming weeks, something he’s collaborating on with Benton’s Smoky Mountain Country Hams.  To top it off, he offered me the perfect pairing of a  Terrapin Moo-Hoo Chocolate Milk Stout, which also has O&S chocolate in it.  Talk about a rich combination.  This was better than any of the after-school snacks I ate as a kid!

Here’s my take-away from talking with Scott, and what I think are some of the biggest secrets of his success. To be honest, I think these are some of the best keys to any modern business’s prosperity:

1. Authenticity: Olive & Sinclair offers an authentic story and product.

2. Collaboration: O&S collaborates with Terrapin, Drew’s Brews, Williams Sonoma, Bongo Java, and even non-profits like Saddle Up.

3. Embracing Social Media: Scott told me they couldn’t have had this massive growth and success without using social media. Only a 13 month old company, O&S has already grown to over 500 retail and wholesale customers.
 
O&S Red Hot Hearts for Valentine’s DayO&S Red Hot Hearts for Valentine’s Day
 
Here’s the best parts of my conversation with Scott:
Zralek: Thank you for the Terrapin Moo Hoo Chocolate Milk Stout…awesome! You were saying that social media has without questions helped your business…tell me how.

Witherow: Obviously it allows us to communicate with anybody out there that’s interested in Oliver & Sinclair. But because we’ve also been blessed with some pretty ridiculous—in a good way—articles. It’s allowed for people to actually kind of let us have a face. We were doing a lot more on Facebook and blogging before we ever even had a website. So that was a big part of it.

ZRALEK: Part of what I find in my work representing businesses as a lawyer is that, when people who are older than us (both in our 30s) are running companies, they often question the value of social media.

WITHEROW: Yeah.

ZRALEK: And to me, companies like yours are a prime example of how social media can help fuel the explosive growth you’ve experienced.

WITHEROW: I think for me and the company, I think that we all just believe in this product. We’re not…we don’t necessarily get into chocolate as like a monetary thing, you know, to make like a bazillion dollars. So it started off with just kind of loving the idea of being able to make chocolate. And then for me it was—I want to make chocolate personable and…I don’t know what this sounds like. But I think that we were successful in making it approachable and, again I don’t mean it arrogantly, but I think we do make a good product, and I think that social media is hugely important as long as you have a good product.

ZRALEK: I agree.

WITHEROW: But I think…

ZRALEK: If you’ve got nothing behind it, it doesn’t matter.

WITHEROW: Yeah, if it’s all this kind of chutes and ladders then you’re only going to go so far with it. But I think that—it’s been great even getting feedback, good and bad. I mean there have been people that have shot me a message on Facebook saying something was up or they noticed something and, like we had one customer who got a chocolate bar that wasn’t up to their standards of what they thought O&S was. And so she Facebooked me and, with the a batch number that we include on every bar, we found out where she bought it. It was poor product placement and it was such an old bar…I mean such an old bar that it shouldn’t have been on the shelf. So we had to go in and make sure that they were off the shelf and that our batch numbers are—they’re done for a reason. So that’s a great part to me.

ZRALEK: So this beer that you’re letting me taste, what’s the best chocolate that goes with it?

WITHEROW: [Handing me a sample of an upcoming release where O&S is collaborating with Benton’s Hams.] It will be a little while before it’s out.

ZRALEK: So what is that that I just tasted?

WITHEROW: It’s a smoked nib.

ZRALEK: From Benton’s Farm…they’re teaming with you?

WITHEROW: Yeah, we’re kind of teaming up for a little project. Hopefully we’ll see it through.

ZRALEK: And what’s that made of…it’s so good. Is there some bacon in there?

WITHEROW: No, [it’s just] nibs [that] are smoked by Alan down in Madisonville.

ZRALEK: So it’s more of the smoked flavor than the bacon.

WITHEROW: Yeah, there is no bacon in there really because it’s just…it’s Alan good quality smoked [flavor]…

ZRALEK: Wow it tastes good. . . .
 
Tasting of Various O&S ChocolateTasting of Various O&S Chocolate
ZRALEK: [W]hen did you decide to start this [company]?

WITHEROW: That was somewhere 2008 sometime, I think.

ZRALEK: What were you doing before Oliver & Sinclair?

WITHEROW: Just working in kitchens here in town. At the time I was a pastry chef at F. Scott’s.

ZRALEK: I didn’t know that.

WITHEROW: Yeah, I was there for about three years

ZRALEK: Did you go to culinary school somewhere?

WITHEROW: Yeah I went to Le Cordon Bleu.

ZRALEK: So you don’t recommend just anybody deciding to start their own chocolate shop? Having a little training comes in handy?

WITHEROW: Yeah but I didn’t learn how to make chocolate in culinary school. They didn’t guarantee me that. It’s more of working with chocolate. And I always try telling people it’s kind of like people that really like craft beers tend to start home brewing at some point. And I worked a lot with chocolate so I learned how to make my own chocolate. And I just started doing it.

ZRALEK: Where did you sell to first? Who was your first buyer?

WITHEROW: Mitchell’s Deli.  [Mitchell’s, the best deli in Nashville, is literally upstairs from Olive and Sinclair.]

ZRALEK: Are you selling primarily in Middle Tennessee?

WITHEROW: No, we’re nationwide and in Canada.

ZRALEK: So you started in ’08, it’s now January 2011…

WITHEROW: Well, I say we started in ’08. I started experimenting in ’08 and making test batches.

ZRALEK: So when was your first sale?

WITHEROW: September of 2009.

ZRALEK: Wow. You’re a young company.

WITHEROW: Yeah. We’re a year and three months.

ZRALEK: That’s great. . . .

ZRALEK: [O]bviously you wear a lot of hats. I assume that you [serve as] creative director, HR director, CEO, chief culinary designer and are you also making house calls to these places or do you send somebody else out there for you?

WITHEROW: We don’t call on anybody. We don’t approach someone in hopes that they’ll sell our chocolate. Maybe the first two months some of that went on, maybe three, probably two. But we really tried to slow down after that. We did some here and there during brief interims where we kind of thought it was getting quiet and you start to get kind of nervous as a new company or whatever. And you think well we need to pick up the phone and start cold-calling. But I think that we’ve all really found that just holding tight and just getting the product out there and in other ways. Yeah, that’s kind of how we do it.

ZRALEK: Let me ask you who you’ve teamed up with in terms of making chocolate. So you’ve teamed up with Benton’s Hams.

WITHEROW: Yeah, with Alan. And that’s a new something.

ZRALEK: So that’s on its way. Who else have you teamed up with if anybody?

WITHEROW: Well we teamed up with Terrapin, you know, for the Moo Hoo. And we look at all the local guys. I called the Yazoo boys [Linus Hall and his team] and made sure that [they didn’t mind] cause they’re the home team, so…
ZRALEK: Have you done anything with a coffee company yet?

WITHEROW: Yeah, we do stuff with Bob Bernstein [at Bongo Java]  in our normal coffee line. And then we do a line that’s exclusively at Williams-Sonoma [and one] that we do with my buddy Drew [of Drew’s Brew’s].  And it’s a totally different chocolate and a totally different roasted coffee. So it’s kind of a new interpretation of that.

ZRALEK: Okay, one last question…

WITHEROW: Yazoo as well. I gotta say we have teamed up with Yazoo…

ZRALEK: …and you’re drinking Yazoo as we’re talking.

WITHEROW: Yeah.

ZRALEK: So a good loyal follower.

WITHEROW: Yeah, I’m a big fan.

ZRALEK: Who do you see as your main competitor and who do you see—that’s probably a bad term—but who do you see as…is there any other chocolatier in the US that you think does a really good job like you do?

WITHEROW: I don’t want to look at them as competition. I guess in a way I kind of have to. But…

ZRALEK: Who else is a local chocolatier that you like?

WITHEROW: Well, just to…we’re not really chocolatiers. We don’t make truffles, we don’t…

ZRALEK: Chocolate company…what’s the right word?

WITHEROW: We’re chocolate makers. We import beans [then roast them and temper them].

ZRALEK: So who else does it like you do?

WITHEROW: Nobody in Tennessee.
 
Imported Cocoa Beans at O&SImported Cocoa Beans at O&S 

Copyright Stephen J. Zralek 2011 ©. All Rights Reserved.

Olive and Sinclair's Experience: Secrets to Success for Any Business

On January 31, 2011, I sat down to talk with Scott Witherow, owner of Olive and Sinclair Chocolate Co. , which makes the South's best chocolate.









Olive & Sinclair's Exclusive with Williams-Sonoma

Later that night, he hosted WaterCooler, a monthly networking event for young entrepreneurs that some friends and I co-founded in August 2009.  We had a jam-packed crowd of over 40 people.  Everyone, it seems, wants to learn more about this company.  (For another great write-up on the tasting, check out the recent post on Nashville Foodies' blog, or see Gwyneth Paltrow's blog "Goop," which highlighted O&S.)

Begun just 13 months ago in September 2009, Olive and Sinclair’s growth has been as viral as a posting on Facebook or Twitter.  O&S has already gained an exclusive contract with Williams-Sonoma for some of its products, and the demand for its chocolate grows every day.

We met after work at the office of O&S, which doubles as factory, research and design center, marketing headquarters, and nerve-center for all things chocolate in Nashville.  Before everyone from WaterCooler arrived, Scott offered me a sneak-preview sample of an upcoming chocolate he plans to launch in the coming weeks, something he’s collaborating on with Benton’s Smoky Mountain Country Hams.  To top it off, he offered me the perfect pairing of a  Terrapin Moo-Hoo Chocolate Milk Stout, which also has O&S chocolate in it.  Talk about a rich combination.  This was better than any of the after-school snacks I ate as a kid!

Here’s my take-away from talking with Scott, and what I think are some of the biggest secrets of his success. To be honest, I think these are some of the best keys to any modern business’s prosperity:

1. Authenticity: Olive & Sinclair offers an authentic story and product.

2. Collaboration: O&S collaborates with Terrapin, Drew’s Brews, Williams Sonoma, Bongo Java, and even non-profits like Saddle Up.

3. Embracing Social Media: Scott told me they couldn’t have had this massive growth and success without using social media. Only a 13 month old company, O&S has already grown to over 500 retail and wholesale customers.










O&S Red Hot Hearts for Valentine's Day

Here’s the best parts of my conversation with Scott:
Zralek: Thank you for the Terrapin Moo Hoo Chocolate Milk Stout…awesome! You were saying that social media has without questions helped your business…tell me how.

Witherow: Obviously it allows us to communicate with anybody out there that’s interested in Oliver & Sinclair. But because we’ve also been blessed with some pretty ridiculous—in a good way—articles. It’s allowed for people to actually kind of let us have a face. We were doing a lot more on Facebook and blogging before we ever even had a website. So that was a big part of it.

ZRALEK: Part of what I find in my work representing businesses as a lawyer is that, when people who are older than us (both in our 30s) are running companies, they often question the value of social media.

WITHEROW: Yeah.

ZRALEK: And to me, companies like yours are a prime example of how social media can help fuel the explosive growth you’ve experienced.

WITHEROW: I think for me and the company, I think that we all just believe in this product. We’re not…we don’t necessarily get into chocolate as like a monetary thing, you know, to make like a bazillion dollars. So it started off with just kind of loving the idea of being able to make chocolate. And then for me it was—I want to make chocolate personable and…I don’t know what this sounds like. But I think that we were successful in making it approachable and, again I don’t mean it arrogantly, but I think we do make a good product, and I think that social media is hugely important as long as you have a good product.

ZRALEK: I agree.

WITHEROW: But I think…

ZRALEK: If you’ve got nothing behind it, it doesn’t matter.

WITHEROW: Yeah, if it’s all this kind of chutes and ladders then you’re only going to go so far with it. But I think that—it’s been great even getting feedback, good and bad. I mean there have been people that have shot me a message on Facebook saying something was up or they noticed something and, like we had one customer who got a chocolate bar that wasn’t up to their standards of what they thought O&S was. And so she Facebooked me and, with the a batch number that we include on every bar, we found out where she bought it. It was poor product placement and it was such an old bar…I mean such an old bar that it shouldn’t have been on the shelf. So we had to go in and make sure that they were off the shelf and that our batch numbers are—they’re done for a reason. So that’s a great part to me.

ZRALEK: So this beer that you’re letting me taste, what’s the best chocolate that goes with it?

WITHEROW: [Handing me a sample of an upcoming release where O&S is collaborating with Benton’s Hams.] It will be a little while before it’s out.

ZRALEK: So what is that that I just tasted?

WITHEROW: It’s a smoked nib.

ZRALEK: From Benton’s Farm…they’re teaming with you?

WITHEROW: Yeah, we’re kind of teaming up for a little project. Hopefully we’ll see it through.

ZRALEK: And what’s that made of…it’s so good. Is there some bacon in there?

WITHEROW: No, [it’s just] nibs [that] are smoked by Alan down in Madisonville.

ZRALEK: So it’s more of the smoked flavor than the bacon.

WITHEROW: Yeah, there is no bacon in there really because it’s just…it’s Alan good quality smoked [flavor]…

ZRALEK: Wow it tastes good. . . .










Tasting of Various O&S Chocolate

ZRALEK: [W]hen did you decide to start this [company]?

WITHEROW: That was somewhere 2008 sometime, I think.

ZRALEK: What were you doing before Oliver & Sinclair?

WITHEROW: Just working in kitchens here in town. At the time I was a pastry chef at F. Scott’s.

ZRALEK: I didn’t know that.

WITHEROW: Yeah, I was there for about three years

ZRALEK: Did you go to culinary school somewhere?

WITHEROW: Yeah I went to Le Cordon Bleu.

ZRALEK: So you don’t recommend just anybody deciding to start their own chocolate shop? Having a little training comes in handy?

WITHEROW: Yeah but I didn’t learn how to make chocolate in culinary school. They didn’t guarantee me that. It’s more of working with chocolate. And I always try telling people it’s kind of like people that really like craft beers tend to start home brewing at some point. And I worked a lot with chocolate so I learned how to make my own chocolate. And I just started doing it.

ZRALEK: Where did you sell to first? Who was your first buyer?

WITHEROW: Mitchell’s Deli.  [Mitchell’s, the best deli in Nashville, is literally upstairs from Olive and Sinclair.]

ZRALEK: Are you selling primarily in Middle Tennessee?

WITHEROW: No, we’re nationwide and in Canada.

ZRALEK: So you started in ’08, it’s now January 2011…

WITHEROW: Well, I say we started in ’08. I started experimenting in ’08 and making test batches.

ZRALEK: So when was your first sale?

WITHEROW: September of 2009.

ZRALEK: Wow. You’re a young company.

WITHEROW: Yeah. We’re a year and three months.

ZRALEK: That’s great. . . .

ZRALEK: [O]bviously you wear a lot of hats. I assume that you [serve as] creative director, HR director, CEO, chief culinary designer and are you also making house calls to these places or do you send somebody else out there for you?

WITHEROW: We don’t call on anybody. We don’t approach someone in hopes that they’ll sell our chocolate. Maybe the first two months some of that went on, maybe three, probably two. But we really tried to slow down after that. We did some here and there during brief interims where we kind of thought it was getting quiet and you start to get kind of nervous as a new company or whatever. And you think well we need to pick up the phone and start cold-calling. But I think that we’ve all really found that just holding tight and just getting the product out there and in other ways. Yeah, that’s kind of how we do it.

ZRALEK: Let me ask you who you’ve teamed up with in terms of making chocolate. So you’ve teamed up with Benton’s Hams.

WITHEROW: Yeah, with Alan. And that’s a new something.

ZRALEK: So that’s on its way. Who else have you teamed up with if anybody?

WITHEROW: Well we teamed up with Terrapin, you know, for the Moo Hoo. And we look at all the local guys. I called the Yazoo boys [Linus Hall and his team] and made sure that [they didn’t mind] cause they’re the home team, so…
ZRALEK: Have you done anything with a coffee company yet?

WITHEROW: Yeah, we do stuff with Bob Bernstein [at Bongo Java]  in our normal coffee line. And then we do a line that’s exclusively at Williams-Sonoma [and one] that we do with my buddy Drew [of Drew’s Brew’s].  And it’s a totally different chocolate and a totally different roasted coffee. So it’s kind of a new interpretation of that.

ZRALEK: Okay, one last question…

WITHEROW: Yazoo as well. I gotta say we have teamed up with Yazoo…

ZRALEK: …and you’re drinking Yazoo as we’re talking.

WITHEROW: Yeah.

ZRALEK: So a good loyal follower.

WITHEROW: Yeah, I’m a big fan.

ZRALEK: Who do you see as your main competitor and who do you see—that’s probably a bad term—but who do you see as…is there any other chocolatier in the US that you think does a really good job like you do?

WITHEROW: I don’t want to look at them as competition. I guess in a way I kind of have to. But…

ZRALEK: Who else is a local chocolatier that you like?

WITHEROW: Well, just to…we’re not really chocolatiers. We don’t make truffles, we don’t…

ZRALEK: Chocolate company…what’s the right word?

WITHEROW: We’re chocolate makers. We import beans [then roast them and temper them].

ZRALEK: So who else does it like you do?

WITHEROW: Nobody in Tennessee.










Imported Cocoa Beans at O&S

***********************************

Copyright Stephen J. Zralek 2011 ©. All Rights Reserved.

Anonymous Online Defamation: Fighting Back to Protect Yourself & Your Business



With the explosion of social media, businesses and individuals are becoming daily victims of anonymous online defamation. With tools like Twitter and Topix, now everyone has a megaphone to say whatever they want to the widest possible audience. Many say this is freedom of speech at its best. But as with anything, this freedom comes at a high price.

Putting bloggers on equal footing with traditional journalism has many upsides, but now we are beginning to see the downsides, as well. Online reviews of restaurants and movies, for example, are often helpful. Generally, those reviews state opinions rather than facts, such as: “This movie was terrible,” or “This restaurant has the best food.” Opinion cannot constitute defamation. But websites today also allow patients to review doctors, students to review teachers, and customers to review everything from iPads to car repair service. When these reviews include untrue facts, they may constitute defamation. For example, a review expressing a diner’s opinion about how food tastes is mere opinion and does not constitute defamation, but a review claiming that a restaurant had a health department rating of 65 when the actual rating was 97 is an untrue fact that likely could serve as the basis of a defamation claim.

Sometimes the negative comments are minor and the best advice is to brush them off. But other times the comments are serious and deserve a stronger response, such as when they indicate you committed scandalous or criminal conduct, that you are untrustworthy, or that you have committed malpractice. These comments can damage your reputation and harm you economically if they steer business away from you. When that happens, especially if it happens more than once from the same person, you may have grounds to assert a claim of business interference, and not just defamation.

One of the biggest challenges with the Web 2.0 is the fact that most online reviews and comments are made anonymously. If that’s the case, how can you protect yourself? How can you even find out the identity of the poster?

Fortunately, victims are not without recourse. Most people think that they can say whatever they want online and that no one will ever know who said it. This is incorrect. There are ways to find out the identity of online posters, but you need to act quickly since Internet service providers (ISPs) often destroy records of online activity after 180 days.

If you find that you are the victim of disparaging comments made online, you won’t get very far suing the website that hosts the comments (known as user generated comment or “UGC”). Hosting websites are immune from liability related to UGC under Section 230 of the Communications Decency Act. But you can have your attorney send a cease & desist letter to the website demanding that the comments be removed. Sometimes websites comply; other times their terms & conditions do not allow them to comply without a court order.

When you want to find the identity of the anonymous poster, and not just have the comments removed, you can also file a “John Doe” lawsuit against unknown defendants, empowering you to subpoena the host website for the IP address of the person posting the comments. From there, you can determine the ISP. Because the Cable Communications Policy Act of 1984 prohibits ISPs from disclosing personally identifying information about Internet users to non-governmental entities without a court order, the next step is to obtain a court order allowing you to subpoena the ISP for the identity of the poster. Recently, a court in Nashville refused to allow an anonymous poster to hide his identity, and allowed the victim to move forward with its subpoena of the ISP.

Finally, responding to anonymous online defamation often requires a multi-faceted approach. Recently, one of my business clients found several comments online that accused its employee of criminal and scandalous conduct. Given the context, the client needed legal advice on not just the social media issues, above, but also with employment law issues. If defamatory comments are made that threaten to damage your reputation and your business, don’t just sit back and take it. Instead, consider your options in fighting back.
© Stephen J. Zralek 2011

Relaunching TheExpressive Blog to Focus on the Entrepreneurial & Community Spirit of Nashville

What a great Sunday!  Big white flakes of snow are falling outside my window, the Christmas tree is lit and our baby is napping upstairs.  I mention the baby napping for two reasons: first, it's amazing having a baby in my life; and second, it gives my wife and me a few minutes off.

In these few minutes before our baby wakes up, I'm excited to tell you that TheExpressive is re-launching.  Instead of focusing on the law, this blog will highlight the incredible entrepreneurial and community spirit we have in Nashville.

People hear "Nashville" and they think Grand Old Opry, HCA, Vanderbilt/Fisk/Belmont or the Titans.  (Well, they think of the Titans when they're playing well, which isn't lately.)  But that talent is in so many other places, too.  It's in restaurants like Burger Up, the coffee beans of Drew's Brews, the books by Alice Randall, and the businesses like Emma and Griffin Technology.  That spirit is also in our non-profits like Conexion Americas and Community Food Advocates; in our art galleries like Zeitgeist; and our drop-in clinics like United Neighborhood Health Services.

A year and a half a go, I started something called WaterCooler with a friend, Renata Soto.  We meet once a month to hear from young entrepreneurs.  We've had a lot of fun, and met some inspiring people: Chris Ferrell of SouthComm spoke on the changing media landscape; Nashville Captial Network's Sid Chambless spoke on the availability of venture capital funds; Laura Creekmore spoke on social media; Linus Hall gave us a tour of Yazoo Brewery; and Becca Stevens introduced us to two women who graduated from her program at Magdalene House after surviving on the streets as prostitutes.

Tomorrow, we're headed to Olive & Sinclair to tour Nashville's own chocolate factory and hear the story of founder/chocolatier Scott Witherow.  Olive & Sinclair is a great example of all of the above: people with a vision who take a risk, enjoy great success, and benefit their communities in many different ways.  Their stories are inspiring to me and I hope you find them inspiring, too.

Stories like these are the ones I plan to highlight in this blog.  I hope to feature a different entrepreneur or community leader each week.  Hopefully, by finding what inspired and motivated them, we can learn something to apply to our own jobs, neighborhoods and community groups.

I hear the baby -- she's awake and I've had my break.  Back to my most important job and favorite pastime... fatherhood.

Ninth Circuit Offers Best Guidance on Issues of Copyright Registration Requirement to Initiate Litigation

On March 2, 2010, the Supreme Court issued its decision in Reed Elsevier v. Muchnick.  In that decision, the Court clarified that Section 411(a) of the Copyright Act "does not restrict a federal court's subject-matter jurisdiction."  Instead, Section 411(a) is merely a "precondition to filing a claim."  Importantly, the plurality explicitly declined to address "whether Section 411(a)'s registration requirement is a mandatory precondition to suit that . . . district courts may or should enforce sua sponte by dismissing copyright infringement claims involving unregistered works."  Instead, the Court left that issue unresolved.

Picking up where Reed Elsevier left off, the Ninth Circuit specifically addressed that issue in a decision on May 25, 2010, namely what it means to "register" a copyrighted work.  See Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, 606 F.3d 612 (9th Cir. 2010).  The Cosmetic Court issued a thoughtful decision that concluded "registration" under 411(a) is accomplished upon mere "receipt by the Copyright Office of a complete application."  In so holding, the Ninth Circuit adopted what many courts refer to as the "application" approach, rather than the "registration" approach. 

The Cosmetic Ideas decision provides the best analysis on the issue to date.  In amplifying the sound reasoning of La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195, 1202-04 (10th Cir. 2005), the Cosmetic Ideas opinion examined the plain language of Section 411(a), the Copyright Act as a whole, and even the purpose of the Act.  It found the plain language unhelpful in defining "registration," and it found five sections of the broader Copyright Act to be instructive, but not clearly supporting either the application approach or the registration approach. In examining the purpose of the Copyright Act, the court concluded that "the application approach better fulfills Congress's purpose of providing broad copyright protection while maintaining a robust federal register." 

Specifically, the Cosmetic Ideas Court noted that the application approach offers these benefits over the registration approach: (a) "avoids unnecessary delay in copyright infringement litigation . . . [g]iven that copyright owners will ultimately be allowed to proceed regardless of how the Copyright Office treats the application"; (b) "avoids delay without impairing the central goal of copyright registration"; and (c) avoids the "worst-case scenario" under the registration approach, which "could cause a party to lose its ability to sue." 

One benefit of the application approach that Cosmetic Ideas missed is that it puts U.S. works on equal footing with non-U.S. works.  Under the Berne Convention, foreign works may not be subject to registration formalities prior to initiating litigation.  The registration approach actually treats non-U.S. works better than U.S. works, because it requires owners of U.S. works to wait for registration prior to filing an infringement action.  By adopting the application approach, U.S. works are given equally favorable treatment.

Look for the Cosmetic Ideas opinion to be the new road map for courts across the country as they grapple with deciding whether to adopt the application or registration approach.  More courts should follow the analysis in Cosmetic Ideas and reach the same conclusion.

Finally, many of the courts that adopted the registration approach did so while dismissing the complaint before them for lack of subject matter jurisdiction.  That is, many of them held that since 411(a) required a copyright plaintiff to obtain registration prior to filing suit (i.e., the registration approach), the court lacked subject matter jurisdiction.  See Specific Software Solutions, LLC v. Institute of WorkComp Advisors, LLC, 615 F. Supp. 2d 708, 716 (M.D. Tenn. 2009).  As Cosmetic Ideas notes in note 4, however, many of these cases have been abrogated, in part, by Reed Elsevier.  Knowing that should help lawyers and litigants who are seeking to persuade courts to abandon the registration approach and adopt the application approach instead.

Artists' Rights & the Law

I had a good conversation with sculptor John T. Unger on his Internet radio show, Art Heroes, on February 25, 2010.  John is a client of mine who creates artisanal firebowls.  He's also a big proponent of social media and uses it to market his art and create an online community of artists.  In 2009, I had the privilege of representing John in a federal court lawsuit over his copyrights and trade dress in the firebowls when unauthorized replicas of his bowls began appearing on the market.

In our conversation on Art Heroes, we talked about "Artists' Rights and the Law."  John began by asking me to discuss the difference between rights under copyright, trademark, trade dress and patent law.  We talked about the benefits conferred on artists who register their works (such as the right to recover statutory damages in court, the right to attorneys fees under copyright law, and the presumption of validity that accompanies registrations).  We also talked about how for most artists, copyright provides the longest amount of protection (life of the artist plus 70 years), compared with trademark (10 year periods open to renewal) and design patents (14 years).  Applying for copyright registration is also  more affordable ($35 filing fee) than applying for trademark registration ($335 filing fee per class), both of which are significantly more affordable than applying for a patent ($5,000-$10,000 including attorney fees).

We also talked about when an artist may use, rely on, critique or "sample" other artists' work.  Copyright protection confers exclusive rights on authors, but an exception to this exclusivity is the doctrine known as "fair use."  For most artists, the question comes down to whether their newer work that borrows from earlier work is "transformative."  I'll blog more on Fair Use in the future.

We also talked about something known as "Recapture Rights" or "Termination of Transfer Rights," which highly impacts literary authors and singers/songwriters, among other artists.  Often when young or budding artists are getting established, they transfer their copyright rights to publishers or others in exchange for securing a book or record deal.  Realizing the inherent inequities of this draconian step, Congress gave artists the right to "recapture" their copyright rights for five year periods. For works created Jan. 1, 1978 to present, recapture rights kick in after first 35 years for a 5 year window from year 35 to year 40 (the earliest this would apply is 2013).   For most works created prior to Jan. 1, 1978, the recapture period is between 56th and 60th years, and artists get a second bite at the apple between years 75 and 79.   Artists get the remainder of the copyright term if they provide notice of termination of transfer during these five-year periods.  Don't forget: recapture rights are "use it or lose it" rights -- if you miss the five-year window, you're out of luck.  I'll blog more on Recapture Rights in the future, too.

John asked me what I thought about Myows.com, an online service that provides a central repository for artists' online works.  Myows stands for "My Original Works," and, which it is still in its infancy, looks like a great supplement to copyright registration.  Myows.com provides a time-stamp on all online works, down to the minute, which could be useful in establishing priority in copyright infringement suits.  To the extent Myows.com offers legal advice, I found several statements that were inaccurate and hope, instead, that Myows will delete these pages.  Major upside: Myops is FREE.

John hosts different people every week to talk about art and artists' rights. Check out his next show this coming Thursday at 9pm Central.  Future guests are scheduled to talk about licensing rights and becoming famous as an artist without leaving your day job.

The More Interactive Your Website, the More Likely Your Business Can Be Forced to Defend Lawsuits in Other States

Businesses need to be intentional about how interactive they allow their websites to be, since they can be forced to defend themselves in lawsuits filed in another state if they actually make sales in other states through their websites.  In a decision issued August 28, 2009, federal Judge Aleta Trauger held that the U.S. District Court for the Middle District of Tennessee had no personal jurisdiction over the Denver-based defendant that had been sued for trademark infringement and unfair competition in Nashville, despite the defendant having a fully interactive web page from which Tennessee residents could order services.  Capital Confirmation, Inc. v. Auditconfirmations, LLC, No. 3:09-0412 (M.D. Tenn.).  My law partner and I served as local counsel for the defendant, along with Bobbee Musgrave of Denver.

For many reasons, it is almost always preferable to defend a lawsuit in your hometown or home state.  In today's environment, where almost every business has a website, many businesses would be surprised to learn they can be forced to defend themselves in a lawsuit in another state, depending in part on how interactive their website is.  Fully interactive websites are those that allow customers to order goods and services from the site.

In general, the law requires plaintiffs to sue defendants where they reside or have their principal place of business, or where the acts giving rise to the lawsuit occurred.  But where defendants "purposefully avail" themselves of the benefits of another state, they can be forced to defend in that other state.  Before the Internet, defendants who sold their goods and services in person typically did so locally, and could not be sued in other states.  The Internet, however, has allowed businesses of all sizes to expand their reach without ever physically leaving their home state.  Businesses with a robust Internet presence may unwittingly be at risk for defending against out-of-state lawsuits.

In the Sixth Circuit (the appeals court that covers Tennessee, Kentucky, Ohio and Michigan), a website's interactivity is measured on a sliding scale.  At one end are "passive sites that only offer information for the user to access."  At the other end are "active sites that clearly transact business and/or form contracts."  In the middle are "hybrid or interactive sites that allow users to exchange information with the host computer," and these middle cases must be evaluated on an individual basis.  See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 890 (6th Cir. 2002).

Following well-established Sixth Circuit precedence, Judge Trauger's decision makes clear that an interactive website by itself is insufficient to be haled into federal court in Tennessee.  As she explained, suing an out-of-state defendant in Tennessee requires "something more" than merely an interactive web page.

In Capital Confirmations, the defendant's web page was fully interactive, but it had no legitimate sales into Tennessee.  The plaintiff had posed as a non-existent individual named "Frank Jepson," purporting to enter into a transaction on the defendant's web page from within Tennessee.  The court considered these transactions to be illegitimate.  The only other interaction with Tennessee was from a request that was aborted before any payment was made by the customer, so the court considered that interaction to be incomplete and of no impact.  The mere fact that a Tennessee resident could theoretically purchase goods or services over the defendant's web page is insufficient to hale the defendant into Tennessee.

The lesson to be learned from this decision is that businesses need to be intentional about the level of their web pages' interactivity.  One upside of the Internet is the ability to sell and market all across the country, not to mention all over the world.  The downside is that sales in other states can create jurisdiction in courts far from home.  One step businesses can take to minimize the chance of being sued by their customers out of state is to include a provision in all contracts that sets the exclusive jurisdiction in the place where the business is headquartered.  But such a provision will not work in suits by non-customers.  Instead, businesses need to gauge their appetite for defending lawsuits in other states before selling goods and services there, whether through the Internet, over the telephone, through distributors or in person.