Monday, February 3, 2014

SnapTerms: Applying the Pareto Principle to Internet Law

I'm excited about the new crop of law startups that are offering what I like to call "mass customization" or "pareto law". That is, 80% of clients have the same needs, 80% of the contractual language/work is standardized, and it's only the last 20% that's actually customized to a client's needs. Note though that I don't think the 80/20 rule applies to litigation. Fairdocument (SF) seems to be doing this for estate planning because, let's face it-- if you're married, have two kids without special needs, and are worth less than a couple million, you probably have the same needs as 80% of the American population. Snapterms (LA) is using the 80/20 rule for terms of service, as co-Founder Hansen Tong explains below.

Tell me a bit about yourself.
I am the co-founder of SnapTerms, and also provide legal services through my law firm, Kelly Warner Law.  I specialize in what people call “Internet Law,” so I generally work with startups, online companies, internet business owners, and internet marketing firms. I advise clients on terms of service, privacy policies, COPPA, TCPA, Can-Spam, CDA, and DCMA. My firm also helps with contracts, funding, corporate governance, and some intellectual property. Essentially, we help companies with what they deal with on the Internet.

Tell me more about SnapTerms.
SnapTerms is a service that helps users draft terms of service (TOS) at an affordable price based on a user’s description. We use software to generate the document and have a lawyer review them. We’re in between a Legalzoom, which generates automated template, and a full service law firm, which prepares a customized contract. We have a number of offerings, but the whole package costs between $300-600. I’ve seen competitors offering both a terms of service and privacy policy for $1000.  We also do funny Terms of Service and Privacy Policies, since normal Terms of Service and Privacy Policies tend to run a bit on the dry side. At a full service law firm, it could cost up to $10,000. It just depends on who’s doing it, their experience, and their hourly or flat rate.
Why this workflow?
It makes things more efficient and keeps costs down.  

How did you guys get started?
We’ve been operating for about two years. In my regular law practice, we work with lots of companies, but the rate we charge for drafting is generally more than what some bootstrapping entrepreneurs are willing to pay.

What are terms of service? Why and when would an online business need that? 
It’s a contract between you and your online clients or customers. For example, what if a customer buys something and it breaks? You need a document that explains your return policy.  A TOS is basically a relationship document that outlines a company’s policies and its relationship with its customers.

How about privacy policies? 
If you do business in California, meaning you are in California or have a customer in California, it’s required.  Even if you aren’t doing business in California, it’s a good idea to have a privacy policy in place. A privacy policy essentially details to the user how you collect their personal information, what you collect, what you don’t collect (e.g., user habits or IP addresses, non-personally identifiable information), how you plan on using that information, who you plan on sharing it with, what cookies you use, what tracking you use, where you plan on storing it, how you secure it, and what rights users have to it. I like to call it the who, what, when, where, and why document.

And what are the consequences if you don’t have either one of these?
If you don’t have a TOS and get sued, then a court will interpret your rights. We advise clients not to go that route because the court can do whatever it wants if there’s no contract. In California, if you don’t have a privacy policy, the Attorney General could come after you.

At what point should an online business get a TOS/privacy policy then?
I would recommend getting a TOS/Privacy Policy before the website or application goes live. You definitely should have TOS before you form any relationship with any clients or customers. For the Privacy Policy, get one before you start collecting any personal or non-personal user information.

What the most interesting TOS you’ve come across?
I like Pinterest’s TOS because they break down the legalese into little blurbs that decipher the language for average users. Most users don’t understand the TOS, so anything that can give them clear guidance always stands out.

What is SnapTerm’s greatest challenge? 

We’re looking for funding and trying to expand and diversify our document offerings. We’ve already gotten past the idea state and are now thriving but the challenge for us is scaling while making sure that our customer is satisfied and that we’re doing things the right way.

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