Technology Archives - Page 2 of 8

09/17/201304/28/2022

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.”

08/19/201304/28/2022

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.

07/12/201304/28/2022

…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.

04/01/201304/28/2022

New York E-Retail Ruling May Tax the Supreme Court

This post was written by Kelley C. Miller and Daniel M. Dixon.

On March 21, we posted Clouds Continue To Rain State Tax On Retailers, the most recent in a series of blog posts related to the U.S. state tax implications of cloud computing, e-Commerce and retailing. To keep the thread going, this past Thursday (March 28), the New York Court of Appeals, the highest state court thus far to consider the issue, issued a much-anticipated ruling in Overstock.com v. New York Department of Taxation and Finance (combining two similar cases brought by e-retailers Overstock.com and Amazon.com. At issue is the New York statute that requires the collection of sales or use tax from an e-retailer (a remote vendor) with no physical presence in the state, if, as part of its business model, it pays in-state residents to assist in business solicitation; and the question being litigated is whether that statute violates the Due Process Clause or Commerce Clause of the U.S. Constitution. The Trial Court—and now the Court of Appeals—have upheld the law.

Significant to the Court of Appeals’ decision is its deference to the bright-line requirement of physical presence necessary for a state to require sales or use tax collection. This standard was set forth by the United States Supreme Court in Quill v. North Dakota (504 U.S. 298; 1992). Although the Court of Appeals acknowledged that Quill is still applicable even though the “world has changed dramatically in the last two decades,” it nonetheless noted that changing the physical-presence requirement in light of the way e-retailers now conduct their business, “would be something for the United States Supreme Court to consider.” A key issue in the case was whether the in-state residents hired or engaged by Overstock and Amazon, and who were involved in soliciting business – they are often referred to as “affiliates” – were actively soliciting customers in the state or whether their actions were more akin to that of an advertiser seeking to influence buying patterns – conduct that might be seen as more passive and, accordingly, would not meet Quill’s physical presence standard.

Despite hopes that the Court of Appeals might address this issue in its decision, the majority deferred discussion of this important distinction in lieu of a more focused analysis of whether the New York statute was unconstitutional on its face. The court held that a discussion of the affiliates’ activities was not warranted as neither Overstock.com nor Amazon.com could prove there were no circumstances under which the statute could be constitutionally applied: “The bottom line is that if a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden.”

The dissenting opinion, however, does address the possibility that there could be significant distinctions between those who act as sales agents for a company and those who place advertisements for a company on websites. The dissent noted that mere advertising by a remote seller, through use of an in-state affiliate that might place advertisements on websites, does not meet the Quill test for physical presence. Placing links on websites from within the state to e retailers are advertisements and not solicitations.

Reacting to the decision, Overstock.com indicated that it may ask the United States Supreme Court to review the issue. In a press release issued yesterday by Overstock.com, Acting Chief Executive Officer Jonathan Johnson noted, “Given that courts in other states have upheld U.S. Supreme Court precedent, and struck down similar laws, the matter appears ripe for resolution by the U.S. Supreme Court.” To ask the Supreme Court to review the ruling in the case, a petition for writ of certiorari would be due on or before June 26.

The Rimon State Tax Team will be closely following developments in this case, including not only the possibility of an appeal to the United States Supreme Court, but also the status of The Main Street Fairness Act of 2013 – U.S. federal legislation currently pending in the House of Representatives (and recently given symbolic approval in the Senate) that would allow states to impose sales and use tax requirements on e-retailers (presumably engaged in inter-state commerce) even if the e-retailer does not have a physical presence in a state.

For more information regarding these developments and to stay on top of the legal wrangling in state taxation related to e-Commerce, contact Kelley C. Miller or Daniel M. Dixon directly. Of course, you can always find out more about our Cloud Computing initiative or get the assistance you need by contacting me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

03/21/201304/28/2022

Clouds Continue To Rain State Tax On Retailers

As you may remember, this past January, Rimon presented a teleseminar entitled: State Tax Update: States Can Be Taxing in a Digital World, led by Dan Dixon and Kelley Miller, who are leading the charge in keeping clients informed as the worlds of cloud computing and state tax converge – or perhaps we should say “collide.”

Increasingly, states are scrutinizing the operations of cloud providers and their cloud-related business activities as they seek ways to force online retailers to collect sales tax from customers. Dan and Kelley have become recognized leaders in this area, closely monitoring all 50 state tax departments within the United States, and the dynamically evolving landscape. Dan and Kelley continue to assist clients, speak and write about new state tax developments, and have been quoted in a variety of media sources, including BusinessWeek, The Wall Street Journal, Forbes, NPR, NetworkWorld, E-Commerce Times and The Hartford Courant.

Dan and Kelley have prepared a recent Rimon Client Alert, entitled “The Wall Street Journal, Forbes, BusinessWeek and Fortune 500 Companies All Agree: No One Knows Taxing the Cloud Like Rimon State Tax!” You can read the full alert online “Cloud Computing is Taxing (Web)”, or you can download a PDF version “Cloud Computing is Taxing (PDF).” As you may also recall, in 2010 Rimon launched a cloud computing initiative, commissioning a series of individual white papers, now compiled into a comprehensive work entitled, “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing.”

For more information regarding this alert or to stay on top of the developments in state taxation related to cloud services, products, and platforms, from Rimon lawyers who really know this area, contact Dan Dixon or Kelley C. Miller directly. Of course, you can always find out more about our Cloud Computing initiative or get the assistance you need by contacting me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

02/22/201304/28/2022

What You Don’t Know Can Hurt You

Multiple Choice Question: What do the following have in common:

“Privacy & Data Protection: Distinctions Between Surveillance and Secrecy”

“Ethics, Process, Privilege, Discovery and Work Product in the Digital Age”

“When Worlds Collide: Old Ethics and New Media”

“Outsourcing: The Law & Technology”

“The Changing Legal Landscape: Evolution or Revolution”

“Growing Your Business Internationally – What to Know Before You Go”

“Social Media, Mobile Marketing, Clouds and Crowds: (modules)

Advertising & Marketing in a Digital World
Media & Entertainment: Digital Rights and Wrongs
Financial Services, Payments & E-Commerce
Online Gaming, Gambling & Virtual Worlds
Apps & M-Commerce
Context & Geo-Marketing: Wi-Fi, Bluetooth, SMS, RFID, QR Codes & Augmented Reality
Operations & Performance, Security, Compliance and Interoperability
Wired & Wireless: Sweepstakes, Contests, Product Placement & Branded Entertainment
Anti-Social? Communication & Public Relations for Companies, Employees & Investors
Behavioral Advertising, Endorsements, Blogs, Buzz, Viral, Street Teams & Word of Mouth
Labor & Employment Policies in a Networked Age: The Good, The Bad & The Ugly
Crowd Sourcing, Crowd Funding, Crowd Investing: Today & Tomorrow

“Privacy, Data Protection & Globalizing Technology: Digital Commerce Brings Legal Challenges”

“Comparative Advertising Issues: Multinational Brands; Global Challenges”

“Direct to Consumer: Legal Challenges in the Digital Marketplace”

“Out of Control? Challenges to Privacy & Security in a Big Data World.”

Answers: (a) Seminars & Presentations Given; (b) Seminars & Presentations Available; (c) Targeted at Lawyers; (d) Targeted at Commercial and Business Management; (e) Relevant to Small-to-Medium Size Business; (f) Relevant to Multinational, International & Global Companies; (g) None of the Above; or (Y) All of the Above.

If you guessed (Y), you are correct. Let us know if any of these, a combination of these or a customized version of these or any other presentations might be right for you. Hey, you never know, but what you don’t know, can hurt you. For more information, contact me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

02/14/201304/28/2022

A New Twist to Chubby Checker – Oh No, Not an App for That!

Chubby Checker, whose real name is Ernest Evans, is suing Hewlett Packard for trademark infringement. Chubby Checker, an iconic music entertainer, rose to fame when his song “The Twist” first reached No. 1 on the charts in 1960 and his appearances on the “Ed Sullivan Show” and “American Bandstand” helped spawn a national, if not international, dance frenzy. His 2008 song “Knock Down the Walls” reached the top of the dance charts and sparked a brief comeback for the music legend.

Ernest Evans Corporation, one of Mr. Checker’s companies, was originally granted trademark rights for the use of his name in connection with musical performances. Later, The Last Twist Inc., another of his companies, was granted trademark rights for “Chubby Checker’s” in connection with food products, based on the release of a line of snack foods.

The mobile “app” named “The Chubby Checker” – no, we couldn’t possibly make this up – ostensibly enabled users who downloaded it to calculate the size of a male penis based on the individual’s shoe size. The development shop named Magic Apps, now non-existent, had touted the international appeal of the app, noting “The Chubby Checker” allows calculations based on U.S., UK and European shoe sizes.

Lawyers for Mr. Checker had sent HP a cease-and-desist letter last September and apparently the app was removed from all HP or Palm-hosted websites later that month. In the lawsuit filed in the U.S. District Court for the Southern District of Florida, lawyers for Mr. Checker, now 71 years old, claim that “irreparable damage and harm” has been done to the entertainer’s name and reputation, are seeking an injunction, and are asserting claims of millions of dollars in damages arising from “The Chubby Checker” app that Hewlett Packard Co. made available on Palm mobile devices starting in 2006. You may recall that HP acquired Palm in 2010, and a year later opted to shutter the production of Palm hardware, although it continued to provide technical support to existing Palm users.

The suit alleges that purchasers of the app, as well as anyone simply browsing the webpage, had been misled into believing that Chubby Checker had endorsed the app, and that the use of his name would confuse users who might reasonably conclude the singer had some association with the app bearing his name.

The lawsuit alleges that the defendants made millions of dollars exploiting the name of one of the greatest musical entertainers of our time, and claims the “Defendants’ use of the name ‘Chubby Checker’ in its app is likely to associate the plaintiffs’ marks with the obscene, sexual connotation and images evoked by defendants’ app ‘The Chubby Checker.’” You can read the filing in its entirety right here at Evans, et al. v. Hewlett Packard Company, et al., Case 2:13-cv-14066-JEM.

The Advertising, Technology & Media Law Group at Rimon has lawyers with decades of experience in working with advertisers and agencies, marketing and promotional companies, online, mobile, and traditional, handling matters involving celebrity endorsements – good, bad and sometimes ugly. Let us know if you need us. Call me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work. We are happy to help.

01/23/201304/28/2022

State Tax Update: States Can Be Taxing in a Digital World

Please join Rimon lawyers Dan Dixon and Kelley Miller Thursday, January 31 at Noon EST (9 a.m. PST; 11 a.m. CST) for "Clouds, Codes, and Crunching Numbers: An Update on Current Multi-State Tax Developments in the Taxation of Electronic Goods and Services." Participants will hear about the latest state developments and trends, including affiliate nexus, “Amazon” legislation, states’ tax treatment of various digital products, software, cloud computing, web-based & web-hosting services, information services, data processing, and sourcing rules for digital goods and services transactions. Don’t miss this timely teleseminar!

Registration link: Click here to register for this seminar.

01/18/201304/28/2022

Mobile Money, Mobile Risk – The Future of ePayment Systems

Earlier this week, the editorial staff of the UK-based publication e-Finance & Payments Law & Policy, interviewed Joseph I. Rosenbaum, New York-based partner and Chair of Rimon’s global Advertising Technology & Media law practice, in connection with its cover story for the January 2013 issue. The stimulus for the initial story was the release late last year of a report by the U.S. Federal Deposit Insurance Company (FDIC) regarding the risks attendant to the growth and evolution of the mobile payment industry, and the use of mobile contactless payment technology by consumers and merchants in routine purchase transactions (e.g., NFC, Bluetooth, RFID, SMS, Wi-Fi, and WAP enabled devices generally.)

While the cover story is still in the process of being edited for publication, the editorial staff felt that publishing the full interview separately was itself newsworthy. So follow this link and you can read the full text of the e-Finance & Payments Law & Policy interview with Joseph I. Rosenbaum, partner at Rimon LLP.

You can also read the FDIC report, issued in its Supervisory Insights – Winter 2012 release, right here: Mobile Payments: An Evolving Landscape.

Of course, if you need help or more information, contact Joseph I. Rosenbaum (joseph.rosenbaum@rimonlaw.com), who also leads the ATM Mobile Marketing initiative, or feel free to call upon any of the Rimon lawyers with whom you regularly work. We are happy to help.