Beyond Legal: Social Media Promotions

Yesterday (July 6, 2015), the Social Media Law & Policy Report™ published by Bloomberg BNA posted my article entitled: “Beyond Legal: What You Should Know About Social Media Promotions.”

The article highlights some of the additional considerations advertising and marketing professionals (and their lawyers) need to take into account when conducting sweepstakes, contests and promotional activities on social media platforms.

You can read the article directly at “Beyond Legal: What You Should Know About Social Media Promotions.” , or download a copy for your personal use here: Rosenbaum – Beyond Legal (BNA Reprint).

Do you need to know more about advertising, marketing or promotions operating in the world of social media or on mobile platforms? Our legal team has broad and deep experience in virtually every aspect of advertising and marketing, traditional, digital, virtual on this world or in others, or any of the lawyers with whom you regularly work, at Rimon.

Fraud in Digital Advertising – ANA Report Released

Yesterday (December 9), the Association of National Advertisers (ANA) released a study, “The Bot Baseline: Fraud in Digital Advertising,” exposing the significant fraud present in media buying on the Internet. The losses to the industry for fraudulent, non-human web traffic are billions per year. Doug Wood, Joe Rosenbaum, Todd Mumford and Debra Dermody worked with the ANA on the project, including suggested language for future contracts that addresses non-human web traffic. You can read and download the entire study or the executive summary originally made available to ANA members, entitled “ANA/White Ops Bot Fraud Initiative, Preview for ANA Member Participants” or both.

As always, if you have questions, need help, want guidance or want to know more about Rimon’s advertising, technology and media practice and its resources, experience and capabilities, feel free to contact me, Joe Rosenbaum (joseph.rosenbaum@rimonlaw.com), any of the other lawyers who assisted in the preparation of the report or any lawyer with whom you regularly work at Rimon (rimonlaw.com).

Operation Full Disclosure – The FTC Targets Advertising

Earlier today, the Federal Trade Commission issued a press release indicating that after a review of many national television and print advertisements, warning letters have been sent to a number of companies – including some of the largest advertisers in the United States – noting that they had failed to make adequate disclosures in at least some of their advertising. The initiative, entitled Operation Full Disclosure, is intended to enforce regulations that prohibit advertising that misleads consumers.

The FTC’s targets in this operation are disclosures in fine print, those that were hard to read – even though they contained important information for the consumer. The letters warned advertisers they need to make sure disclosures are clear and conspicuous, and reminded advertisers the disclosures should be close to the claims that are being made. They must not be obscure or disguised with font sizes or colors that make it difficult to read, and on television, they should appear for a long-enough period of time and in a manner that will allow them to actually be read and understood. Consumers should not have to search for them!

Included within each of the FTC letters was a request that each of the advertisers respond back to the FTC with specific actions they individually intended to take regarding their particular advertising, in order to remedy any deficiencies.

You can read the full FTC Press Release and, as always, if you have questions, need help, want guidance, or want to know how best to ensure your advertising and marketing is in compliance with legal and regulatory requirements, just contact me, Joe Rosenbaum, any lawyer in our Advertising, Technology & Media law practice group, or the lawyer with whom you regularly work at Rimon.

What One Lawyer Has Learned About Social Media (But There Are Still 5 Days Left)

Last week I received a novel invitation – call it a ‘dare’ from a long-time colleague and friend in a faraway land. He and I have never actually met, but we have interacted so often professionally and we keep trying to figure out how and when we can end up at the same conference, perhaps even sharing a speaking opportunity or panel so we can finally say ‘Hello’ in person – even split a bottle of wine. The invitation was a novel twist on attracting speakers to a professional conference – specifically the 2014 Webit Global Conference to be held in Istanbul.

Although the agenda was pretty full already, the organizers decided to create some ‘buzz’ by allowing people to vote for a few speaking slots as “Audience Choice” selections. Imagine that, a professional conference with a ‘power to the people’ format. While obviously hoping to increase attendance and excitement for the conference, the balloting is online and you don’t have to be registered to vote.

Now I’m wise enough, with enough experience, to appreciate that a practicing lawyer will NEVER win a popularity contest. I mean seriously – who normally says “I love my lawyer and really want to hear him talk!” I believe this to be true, even if we aren’t charging by the hour!

But I do love a good challenge and I thought it would be a good opportunity to conduct an informal, completely unofficial and invalid experiment. So I sent requests to people I’m connected to on LinkedIn, tweeted on Twitter and provided a link, with ‘Please vote for my presentation’ on my email signature block. Here is what I know and what I learned so far:

1. On this Legal Bytes blog, there have been more than 120,000 visitors, with 76,000 of them unique. So far just this month, there have been more than 2,500 visits. My own contacts – friends, family, professional colleagues, adversaries and people I have met over the years – number well over 6,000. As of this morning, I had 3,677 direct connections on LinkedIn. That means, according to the platform, there are 18,240,386 professionals in my network. That’s more than 18 million people! Eat your heart out Ellen and Ashton! Who’s ‘trending’ now?

2. Although Legal Bytes gets posted on Facebook, I don’t use Facebook otherwise and I only have a little over 480 ‘followers’ on Twitter (most of whom I don’t know), but that may simply be because my tweets, like my Facebook posts, are simply feeds from my blog. Perhaps those other 76,000 people are getting their information here and don’t need to duplicate it on Facebook or Twitter. Further study may be required (not really).

3. If you don’t have a Facebook profile, the organizers won’t let you vote – an interesting condition for a professional conference. Not sure why they didn’t pick a different platform or not require any pre-condition of membership in a network.

4. The organizers apparently won’t let you vote even if you are registered with Facebook, if you don’t have enough ‘friends’ on your profile (a few of my lawyer friends tried to vote and they are just as unpopular as I am). I’m guessing the conference organizers only want people who can spread the word to lots of others.

5. As of this morning I had 92 (yes, 92) votes.  Although I can’t really tell how many total potential speakers entered the contest, I am number 234 and some people have almost 1,000 votes already.

So far, my little experiment has led me to the following observations:

(a) My connections don’t vote, don’t want to vote or are out of the office and will get back to me as soon as they return;
(b) My connections really don’t like lawyers;
(c) My connections either don’t like this lawyer; prefer not to vote for this lawyer; prefer not to vote at all; didn’t qualify to vote (I may ask for a recount); or didn’t like the description.
(d) My thousands, hundreds of thousands and even millions of linked and networked connections don’t mean that much – it’s the people who know me that really count.


Perhaps there are or will be other lessons. After all, there are still 5 days left and if I ultimately end up with more than 18 million votes, I will be forced to admit I was totally wrong about the real power of social networks.

Social & Mobile & Clouds, Oh My!

Joe Rosenbaum recently authored an article that has been published in the Small Business Journal highlighting some of the key issues that have arisen for small to medium-size businesses as a result of the emergence and convergence of these rapidly evolving technological platforms. Joe’s article, “Social & Mobile & Clouds, Oh My!” appears in the March 2014 issue of the Small Business Journal, and you can read “Social & Mobile & Clouds, Oh My!” [PDF] here as well.

If you require legal guidance, support or representation on the issues highlighted in the article, or on any other matters, you can contact Joe directly at joseph.rosenbaum@rimonlaw.com; or you should get in touch with the Rimon attorney with whom you regularly work. We are happy to help.

Monitor Postings in Europe or Face Liability

So you operate a website or have a blog in Europe. You allow others to post comments and interact with your website or blog postings. There is, after all, freedom of expression in Europe, isn’t there? Well on October 10 (2013), the European Court of Human Rights (ECHR) ruled that if you don’t monitor, censor or moderate postings by others on your website or blog, you may well have legal liability and responsibility – especially if the visitors post offensive comments.

In the case of Delfi AS v. Estonia, the Estonian news website (Delfi) ran a story about a ferry that provoked heated controversy in the nation. Many posts and comments contained threatening and offensive language, and many were anonymous. The ferry operator sued Delfi for failing to prevent these comments from becoming public and for protecting the identity of the individuals who posted such threats and abusive language. The Estonian court agreed with the ferry operator and ordered Delfi to pay damages.

Delfi appealed and the ECHR upheld the decision, noting: "The comments were highly offensive; the portal failed to prevent them from becoming public, profited from their existence, but allowed their authors to remain anonymous; and, the fine imposed by the Estonian courts was not excessive." In case you are wondering, Delfi’s terms of use state that individuals who comment were liable for the content they posted. The court stated that since Delfi allowed many anonymous postings, it was reasonable to hold Delfi responsible.

What should you do? Call us and we’ll advise you. As always, if you want to know more about the information in this post, how to address the legal risks, or any other matters that could benefit from experienced legal counsel and representation, please contact me, Joe Rosenbaum, or any of the Rimon attorneys with whom you regularly work.

Crowd Funding. Apologies, William Wordsworth

“I wandered lonely as a cloud
That floats on high o’er vales and hills,
When all at once I saw a crowd,”

. . . and so begins the beautiful and timeless poem by William Wordsworth. Although Wordsworth’s crowd was a host of golden daffodils, the crowds most of us have been hearing about lately are either crowd sourcing (check out When Online Games, Health & Life Sciences and Crowd Sourcing Combine) or crowd funding – the subject of this post.

In today’s world, according to the Wikipedia definition, “crowd funding” refers to the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.”

There remains some confusion in the marketplace as to the mechanisms by which the crowds’ funds are made available to business ventures, film promotion and production, worthy causes, and civic organizations. Contrary to what many may believe, it is currently not legal to solicit, offer or otherwise make available any form of securities or equity investment (I’m over-simplifying, but that is the net effect) through online, crowd or other web-based funding schemes. In other words, you can’t raise equity or solicit investments through crowd funding that provide the expectation of profit or the risk of loss of capital investment – in much the same way the traditional stock markets function when they allow individuals to purchase and sell securities.

It is true that the U.S. Securities Exchange Commission has been talking about promulgating regulations aimed at legitimizing, with regulation and oversight, the use of crowd funding as an investment opportunity (and the SEC has publicly announced that it hopes to have the regulations released for comment this fall). But until the regulators promulgate rules and enable it, you can’t “invest,” and businesses and other ventures can’t “raise capital,” through equity or securities offerings through crowd funding.

So what’s the buzz about. Well, first it combines “power to the people” with “put your money where your mouth is” in ways unheard of prior to the Internet! Second, there are still opportunities to raise capital from the public in ways that aren’t illegal and don’t involve equity or securities. Currently, there are four major categories of crowd funding activity. To wit:

I am a musician (not really, it’s just an example) and I tell you that if you pay me $1,000, I will write a song to or about you. If you pay me $5,000, I’ll not only write the song, but if I’m nominated for a major music award (e.g., Grammy, VMA, CMA), I’ll get you two tickets to the awards show. That is referred to as the ”rewards” model of crowdfunding.

Next is the ”pre-payment” model. Please send me $5 and when the song is completed, but before it’s released and available to the general public for $7, I will send you a copy. If I offer to autograph it for another $3, I’ve combined the pre-payment and rewards model.

Then there’s the cause-related model. Listen, I am talented and you love good music, but I’m starving. Please just send me $10 so I can eat, rent recording studio time, and try to publish and distribute my music. Pure online begging – there is no expectation of anything in return.

Last, but not least, the ”loan” model. Please help finance the production of my music, my tour (I’ll send you a T-shirt) and just lend me some money. I promise to pay you back when I start making money – but, WITHOUT interest. There must be no expectation that anyone who lends money will make a profit (interest) on the loan. While there may still be lending laws that apply as to how this is done, it won’t trigger the prohibitions under securities’ laws, as long as you don’t pay interest.

In conclusion, while there are some high-profile examples of projects that have raised millions through crowd funding, most do not – at least not yet. In fact, most commercial ventures raise very little through crowd funding. In the words of Wordsworth: “A poet could not but be gay, In such a jocund company. I gazed – and gazed – but little thought, What wealth the show to me had brought.”

Is Your Currency Current . . . Virtual, Digital, Crypto?

In recent months, “virtual currency” has been making headlines. Most of us don’t really think about what “virtual” currency means and often confuse it with other forms of money. That said, there is good reason for confusion and concern. Like many other technology-driven innovations, lines are blurring and we know blurring lines means opportunity and danger. So Legal Bytes will tackle this in two parts. The first (below) attempts to describe what all these new terms mean and how they are used. Legal Bytes part two (later this week) will summarize current events – the confusion and concern over exactly what all this means to our economy and why you should care.

Virtual currencies got their start in virtual economies that exist in virtual worlds. For example, in massively multi-player online role-playing games (MMORPGs) such as World of Warcraft, players “earn” credits and have the ability to exchange, use or “spend” this virtual “value” in the game environment, to acquire virtual tools, weapons, skills and game items that may be recreationally fun and integral to game play; but virtual currency never bought you food to eat or housing to shelter you in the real world. HOWEVER, what happens when real people start buying, selling and exchanging virtual currency, and create markets that interact with the real world?

First, let’s get our terms straight. Digital currency is not “virtual.” Digital currency represents a real alternative to government-issued currency. It originated with accounts or promises to pay that were used primarily online. One of the most familiar paper-based examples of a non-government promise to pay is the American Express® Travelers Cheque. More than 100 years old, these payment instruments are backed purely by the full faith and credit of American Express – and not the government of any nation. They aren’t backed by gold or silver or precious jewels or even bananas – just a corporate obligation to repay you, based on a contract (the purchase application form) you sign when they are purchased! As you might have noticed, there are multiple forms of these types of digital promises – one, like its paper-based cousin, is simply a digital promise to pay: numbers representing value backed by the issuer – electronic gift cards, a promotional advertisement that can initiate or enhance a digital music subscription, are examples. In other instances, digital money may be based on some real “deposit” (e.g., using a traditional debit or credit or checking account) in which the transferred funds are held in an electronic account, uniquely identified to the user and more closely resembling a “bank account,” with which most consumers are familiar.

In most jurisdictions, companies that issue digital versions of payment instruments (e.g., Travelers Cheques) or that hold digital financial accounts (e.g., PayPal®) often fall within some banking or financial regulation. For example, in the United States, PayPal is considered a payment intermediary, regulated as a money transmitter under the U.S. Federal Code of Regulation and the various state laws that apply to money transmitters. That said, PayPal is not technically regulated by the Truth-in-Lending Act (TILA) or its implementing Regulation Z, nor by the Electronic Funds Transfer Act, implemented by Regulation E; and although PayPal takes great pains to protect against fraud, in the United States, unless you use a credit card (or debit card) to fund a PayPal transaction, consumers have no technical legal or regulatory protection from fraud by a seller. In Europe, PayPal (Europe) Ltd., was licensed by the Financial Services Authority (FSA) as an Electronic Money Issuer, and in 2007 transferred all of its European accounts to Luxembourg to a new entity PayPal (Europe) Sàrl et Cie SC, which is regulated by the Commission de Surveillance du Secteur Financier.

Some of you history buffs will remember DigiCash (originated by David Chaum in 1990), which sought to anonymize financial transactions using cryptography. Well over the past few years, a company named BitCoin (and others such as Litecoin and PPCoin, which are to a greater or lesser extent based on, inspired by, or technically comparable to BitCoin), have launched and popularized a form of digital currency that is often confused with and referred to as “virtual.” This form of digital currency is referred to by financial and security experts as “cryptocurrency.” Cryptocurrency is a digital currency that uses encryption technology to create and manage the digital currency. They are peer-to-peer and decentralized in nature and, at least for now, all are pseudonymous.

As you can guess, all of these confusing terms and the fact that virtual currency in games, gaming, online social media and networking platforms, and virtual world environments began interacting with the real world, has become not merely confusing but alarming. Look at Second Life, a virtual world that allows the purchase and sale of “Linden Dollars,” the in-world official currency, in exchange for real money through third-party websites. Second Life accords both virtual “real estate” and intellectual property real value in its virtual environment; enables “residents” (avatars) to creatively enhance and customize the resources available in-world; allows some property rights to be exclusive or limited (think supply and demand); and permits the exchange and purchase and sale of virtual property rights in-world; and one’s property remains one’s property (and one retains Linden Dollars until spent or given away or used) throughout the life of one’s avatar – at least as long as Linden Laboratories continues to maintain the Second Life virtual world environment.

These are many of the same conditions that affect real financial systems. No wonder that what started as a curiosity – online digital playgrounds with no real money or value being exchanged – have become complex economic environments that financially interact with real world economic systems and are causing concern among legislators, regulators and courts around the world. In part two, Legal Bytes will review recent developments and try to describe the challenges facing legal, financial, security and business professionals.

…And Now a Word from Your Hedge Fund

This post was written by Frederick Lah.

This past Wednesday (July 10), the SEC voted 4-1 to approve amendments to Rule 506, lifting the 80-year ban on advertising for hedge funds and certain other investments (See, SEC Votes to Ease 80-Year-Old Ban on Private-Investment Ads.) Rimon previously reported these amendments when they were initially proposed in August 2012, and you can read our earlier analysis, SEC Regs Amended To Allow Hedge Funds To Advertise: Potential Data Privacy Implications.

Under the revised Rule 506, hedge funds and other issuers seeking to conduct private offers may now use general solicitation and advertising to offer their securities, provided that: (1) the issuer takes reasonable steps to verify that the purchasers are accredited investors; and (2) all purchases of the securities fall within one of the categories of persons who are accredited investors, or the issuer must reasonably believe that the investors fall within one of the categories at the time of the sale.

To be an accredited investor, the individual’s net worth must exceed $1 million, excluding the value of a primary residence, or the individual’s annual income must exceed $200,000. According to the SEC, the determination of the reasonableness of the steps taken to verify that the investors are accredited is an “objective assessment” by an issuer. An issuer is required to consider the facts and circumstances of each investor and the transaction. The final rule provides a non-exhaustive list of methods that an issuer may employ for verification.

As noted in our previous analysis, it is unlikely we’ll see hedge funds competing with large consumer brands for prime advertising space. Instead, given the target audience, we’ll likely see more tailored efforts, such as email marketing campaigns, direct phone marketing, and targeted online advertising. We are also likely to see new strategies from issuers such as speaking about funds in public and posting details on websites (which may represent quite a change considering many issuers don’t even have websites). As issuers enter into the world of marketing, they will also have to deal with the reality that the SEC is not the only regulatory agency on their radar; these issuers will need to make sure that they’re not engaging in unfair or deceptive marketing practices and drawing the ire (and an investigation or enforcement action) of the FTC.

The amendments become effective 60 days after publication in the Federal Register. For more information on this issue, please contact Frederick H. Lah, the author, or Joseph I. Rosenbaum, editor and publisher of Legal Bytes.

“No taxation without representation”

In the mid-1700s, British colonists in the 13 Colonies, which eventually became the original United States of America, began to summarize their primary grievance against British rule with the slogan, "No taxation without representation." Although certainly not the only cause, many historians agree this was one of the primary grievances that led to the American Revolution. Well this year – 2013 – marks a Centennial which I suspect not a single citizen of the United States will hail as worthy of celebration. This is the 100th anniversary of the tax law.

Tax laws in the United States did exist before 1913. In fact, Congress passed the Revenue Act of 1861 during the Civil War to help pay for the expense of war, but this tax was repealed 10 years later. Then in 1894, Congress enacted a "flat rate" income tax, but the U.S. Supreme Court ruled that law unconstitutional the very next year since it constituted a direct tax that was not allocated on a pro rata basis by each state’s population.

The modern day income tax on individuals arises from the 16th Amendment to the U.S. Constitution that was passed by Congress in 1909, and that legislated the state apportionment requirement out of existence, giving Congress the authority to enact what has become the individual income tax we all know and love today. Since any amendment to the U.S. Constitution requires ratification by at least three-fourths of the states, the Congressional legislation did not actually become the 16th Amendment to the United States Constitution until February 1913, when it was ratified by the state of Wyoming.

Until World War II, income tax applied to less than 10 percent of the U.S. population, and since the tax brackets were graduated, tax historian Joseph Thorndike has noted that in 1935, when the threshold for reaching the top tax bracket was income of $5 million, the top bracket applied to only one person in the United States – John D. Rockefeller, Jr. One last bit of IRS trivia – the filing date for income tax in the United States used to be March 15, but the date was pushed to April 15 when Congress overhauled the income tax statutes in 1954.

I’m sure every U.S. citizen now believes that one of the results of the American Revolution remains that each of us feel absolutely represented by our federal government and therefore we don’t mind paying taxes. Right? Just in case you did want to have your own personal celebration of the 100th anniversary, please feel free to print your own copy of the original 1913 IRS Form 1040 and do with it what you wish. I might just fill it out and send it in today!