Law Offices

HOLLAND & KNIGHT LLP

200 South Orange Avenue, Suite 2600P.O. Box 1526 (ZIP 32802-1526)Orlando, Florida 32801

407-425-8500

FAX 407-244-5288

http://www.hklaw.com

AtlantaBostonFort LauderdaleJacksonvilleLakelandMelbourneMexico CityMiamiNew York

Northern VirginiaOrlandoProvidenceSan FranciscoSt. PetersburgTallahasseeTampaWashington, D.C.West Palm Beach

MEMORANDUM

Sacha Brown

(407) 244-5169

Internet Address:

smbrown@hklaw.com

TO:	Mr. Geoffrey Fox

FROM:	Sacha Brown

RE:	Initial opinion re: License Agreement with Syracuse University and	WebWisdom.com Operating Agreement.

Important Note: This opinion does not reflect any independently researched issues of New York law done by Holland & Knight. All comments issued are based solely upon our review of the Research Memo and reference to the EarthWeb case, both furnished by you. This memo is not a legal opinion based on the truth and accuracy of the above referenced Research Memo.

A review of both the License Agreement between WebWisdom.com (WebWisdom) and Syracuse University (Syracuse) and the Operating Agreement for WebWisdom presents the following questions and concerns associated your acceptance of the Professorship position at Florida State University (FSU).

License Agreement

In re: Section 1.1 "Licensed Technology" - Licensed Technology is defined in subsection 1.1.1 of the Agreement as " 1. WEB WISDOM Education and Training and Related Technologies; 2. Buena Vista Audio-Video Conferencing; 3. Treasure Trove Geographical Information System; 4. TANGO Interactive Collaboration System; 5. WebVoD Digital Video Service, as fully defined in Appendix A and Attached to [the] License Agreement…." The above definition of Licensed Technology is narrowly defined, thus, provided that you refrain from incorporating or using the above defined technology in any technology developed by you subsequent to the Agreement, then this subsequent technology would not be considered Licensed Technology under the Agreement. However, please note that there is another issue concerning ownership of technology developed by you during your employment at Syracuse. This issue is discussed further in the next section of this memo.

In addition, you stated during our telephone conversation that you were unsure of the meaning of the definition set forth in subsection 1.1.3 of the License Agreement. Subsection 1.1.3 states that Licensed Technology includes "[a]ny copyrights, software, know-how, ideas or trade secrets that incorporate or use the technologies identified in Appendix A" of the License Agreement. As you pointed out, (and we agree), this clause does not address whether this definition of Licensed Technology includes technology developed as of the date of the Agreement (March 20, 1998) or whether this definition includes any future ideas associated with the particular area of Licensed Technology covered by the Agreement. Consequently, this section of the License Agreement (subsection 1.1.3) is ambiguous and is subject to various interpretations. Normally, when contract disputes result in litigation and there are ambiguous terms in the contract, the courts interpret the ambiguous terms against the drafter of the contract, i.e., the courts apply the meaning of the party who was not involved in the drafting of the contract (assuming that such party's interpretation was reasonable), absent any particular industry or trade usage normally applied to the term or another meaning applied by both parties in their prior business dealings (not related to the contract in dispute). Thus, any resolution regarding the meaning of subsection 1.1.3 may have to be in the form of a collaboration and agreement between yourself and representatives of Syracuse regarding the meaning of the subsection, or in the form of a court designating a particular meaning to the subsection in the event of litigation regarding the License Agreement.

In reference to your question regarding whether the "know-how" language referenced in subsection 1.1.3 refers to ideas, although it is unusual to possess a license on "ideas", further research of case law would clarify this question. Thus, it is unclear whether the subsection 1.1.3's definition of Licensed Technology includes any future ideas you may have concerning the technology.

In re: Section 5.0 "Title" and Section 8.0 "Enhancements"- it is interesting to note that neither of these sections in the Agreement address who owns the rights to technology developed after the date of the Agreement or who owns title to any improvements developed solely by WebWisdom. Although Section 5.0 states that title to the Licensed Technology is vested in Syracuse University, it does not address the ownership of any improvements made to the technology, any additional technology etc. Thus, these provisions may be subject to various interpretations. Moreover, these provisions do not specify which party has the ownership interest in any enhancements made to the Licensed Technology. This could possibly work in WebWisdom's favor.

However, it is quite possible that Syracuse may possess ownership rights to technology developed by you during your employment with Syracuse. Syracuse could successfully argue that they have rightful title to any technology developed by you during the course of your employment with them by asserting that you were engaged by them to conduct research and that you used their facilities, equipment and personnel to facilitate your research and development of the new technology. One of the ways this argument may be	overcome is if you were to assert that Syracuse hired you in the capacity of a professor/instructor and not as a researcher. However, given the fact that your title at Syracuse is "Director of NPAC" and "Professor of Physics and Computer Science", this would negate the assertion that you were hired to serve solely as an instructor/professor. Consequently, Syracuse would have title to any technologies you developed in your capacity as researcher for Syracuse. However, notwithstanding this, you would have title to any inventions or technologies developed by you after your employment with Syracuse has ended, provided that such inventions/technologies do not use or incorporate any of Syracuse's Licensed Technologies. Moreover, you would have no obligation to assign the rights to improvements in any of the existing technologies, provided that they do not incorporate or use the Licensed Technologies as defined in the Agreement.

Other Concerns- the technology is licensed to WebWisdom only. Although the Agreement permits WebWisdom to sublicense the technology to other individuals or entities in order to promote the development and sale of the Licensed Technologies, it is highly doubtful that WebWisdom's right to sub-license includes your use of the technology at FSU in your individual capacity, i.e., if you use Syracuse's Licensed Technology to facilitate your research in the area of internet technology for FSU, this use of the Licensed Technology would not be in your representative capacity for WebWisdom, or for the benefit of WebWisdom or Syracuse, instead it would be to benefit your employment relationship with FSU, which appears to be an unauthorized use of the technology. Moreover, even if you could successfully argue that you would be using the Licensed Technology in your research at FSU as an agent of WebWisdom it is possible that the confidentiality provisions in the License Agreement may be breached which could be detrimental to WebWisdom. The confidentiality provision in the License Agreement (Section 15.0), prohibits the disclosure of certain confidential information. Confidential information is defined in the Agreement as Licensed Technology not previously disclosed by Syracuse prior to the effective date of the License Agreement, and Licensed Technology that has been marked as confidential. Consequently, your use of the Licensed Technology in your research at FSU could be deemed disclosure of confidential information per the Licensing Agreement which could be grounds for termination of the License Agreement by Syracuse according to subsection 2.2 of the Agreement.

Operating Agreement

In re: Section 8.1 "Duties of General Managers"- this section has a noncompete provision which states that "[n]o General Manager shall engage in any business activity that is competitive with the business conducted by the Company." This noncompete clause neither specifies the time frame in which you are prohibited from competing against WebWisdom nor does it specify the geographic region in which you are barred from competing. The most logical interpretation of the noncompete time period is that it is a prohibition against a General Manager competing against WebWisdom while serving as a General Manager to WebWisdom. Thus, should you and your colleagues decide that your employment at FSU would be competitive with WebWisdom and you choose to resign from your position as a General Manager of WebWisdom, there is nothing in the Agreement that would prevent you from pursuing your employment opportunities with FSU after your resignation from WebWisdom.

In re: Section 9.1(c) "Membership Interest Forfeiture" – according to this provision "in the event of a Member [which includes General Managers] either terminating his employment relationship with Northeast Parallel Architectures Center at Syracuse University or upon voluntary or Involuntary Withdrawal from the Company within 18 months of the date of signing the first Operating Agreement, [the] Member's Economic Interest in the Company is forfeited." Consequently, according to this provision, if you leave Syracuse for employment with FSU, this provision delineates that your Membership Interest in the Company will be forfeited. However, because you will be leaving Syracuse within 36 months of the date of the Operating Agreement's execution (November 20, 1997), the provision specifies that you would have to forfeit 2/3 of your membership interest and not your entire membership interest in WebWisdom. You could attempt to have this particular provision changed to your benefit in the form of an amendment to the Operating Agreement. However, this amendment would have to be unanimously agreed upon and signed by all the members of WebWisdom pursuant to Article 10 of the Operating Agreement.

Noncompetition with Syracuse

You specified during our discussion via telephone that you have not signed a noncompete agreement with Syracuse. However, you stated that during an informal meeting with a representative of Syracuse, you were told that Syracuse intends to prohibit you from competing with them in the area of internet related technology development for a period of three years. A review of the research memo you forwarded to us addressing an "Employee's Common Law Breach of Fiduciary Duty" (Memo), indicates that New York common law places upon all employees, even those that are not bound by a covenant not to compete, a duty of good faith and loyalty to their employers. According to the Memo "[a]n employee can be held responsible at common law under the theories of 1) unfair competition with his employer; 2) misappropriation of trade secrets; and 3) usurpation of a business opportunity."

Based on the Memo, there is some concern that Syracuse could prevent you from competing with them on the grounds of unfair competition and misappropriation of trade secrets. However, it is unclear what the basis of Syracuse's claim of unfair competition would be, (further discussion with Syracuse's representatives along with more in depth research is needed to clarify this issue.) Syracuse may have a stronger argument for forcing you not to compete with them based on the "misappropriation of trade secrets" theory. Under this theory a trade secret is defined as "any formula, pattern, device or compilation of information which is used in one's business and which gives him an opportunity to obtain an advantage over competitors who do not know it or use it." Consequently, if you significantly assisted Syracuse in developing the technology that you plan to use during your tenure at FSU and this technology does in fact give Syracuse a "competitive advantage" over its counterparts (whether in the form of royalties from licensed technology, etc.), then this may be deemed a misappropriation of trade secrets depending on what the technology will be used for. More facts are needed to clarify this issue. Moreover, it is uncertain how these rules apply in the context of a university-professor/researcher relationship, further research is warranted with regard to this issue.

A review of the case of EarthWeb, Inc. v. Schlack, decided by the New York's Third Judicial Department, U.S. District Court, S.D.N.Y. on November 2, 1999 is somewhat favorable to your position but it also presents several concerns. This case sets forth the following test to determine the enforceability of noncompete agreements. In EarthWeb, the court stated that "[i]n New York, non-compete covenants will be enforced only if reasonably limited in scope and duration, and only 'to the extent necessary 1) to prevent an employee's solicitation or disclosure of trade secrets, 2) to prevent an employee's release of confidential information regarding the employer's customers, or 3) in those cases where the employee's services to the employer or deemed special or unique.'" Although the court opined that a one-year noncompete period (even a six month period) was too long given the dynamic nature of the internet technology industry, (particularly when the noncompete agreement failed to specify a geographic limitation), there is some concern with the third prong of the test with respect to your particular situation.	According to the EarthWeb case, to justify the enforcement of a covenant not to compete, an employer must show that the employee excels at his work or that his performance is of high value to his employer. It must also appear that the employee's services are of such character as to make his replacement impossible or that the loss of such services would cause the employer irreparable injury. Thus, it is quite possible that Syracuse could successfully argue that their loss of your technical expertise and services along with your stellar international reputation as a computer science researcher would constitute unique and valuable services that would be impossible to replace or that would irreparably harm the university. More facts are needed.

In addition, the second prong of the test which deals with trade secrets may also pose a problem for you because you were actually involved in the "nuts and bolts" of developing the internet related technology that Syracuse currently has title to. In fact, the court in EarthWeb distinguished between an employee having general conceptual goals re: technology related duties versus an employee who actively participates in writing computer programs, etc. The court implied that the latter situation would be subject to closer scrutiny and possibly warrant the enforcement of a noncompete agreement against a former employee.

Another concern regarding the decision in the EarthWeb case is that the case is a Federal trial court opinion which could be reversed should the plaintiff decide to appeal the decision. Thus, the opinions set forth in this case are not entirely steadfast.

This opinion has been reviewed and approved by James H. Beusse.

ORL1 #532634 v1