Posted on

SEC Adds Chinese Government Interference to Required Risk Reporting

Debbie Klis, a Rimon partner based in Washington, DC, has published a post on the Rimon IM Report noting that just yesterday (26 July 2021) a senior SEC official advised that Chinese companies listed on stock exchanges in the United States, must disclose the potential risks associated with the Chinese government interference as part of their normal reporting requirements.

You can read the entire post Chinese Companies Listed on US Exchanges Must Disclose Potential Risk Associated with Potential Government Interference.

You can also learn more about Debbie and her practice here:  Bio: Debbie A. Klis and if you want to obtain more information, feel free to contact Debbie A. Klis directly. Of course you can always contact me, Joe Rosenbaum, or the Rimon Law lawyer with whom you regularly work.

Posted on

SCOTUS Reins In FTC Enforcement Powers

Today (April 22, 2021) the U.S. Supreme Court dealt a significant blow to the practice by the Federal Trade Commission (“FTC”) of imposing restitution requirements on violators of the Federal Trade Commission Act (“Act”).

In a unanimous decision written by Justice Stephen G. Breyer, the Court held that §13(b) of the Act was never intended, nor affords the FTC the authority to obtain restitution or require bad actors in the commercial marketplace to disgorge any monies they may have received as a consequence of their bad acts.

Although the Supreme Court agreed the FTC could enforce the Act through its own administrative proceedings under §5 of the Act, it held that the 1970 addition to the Act that authorized the FTC to seek injunctive relief to stop activities prohibited by the Act, did not also authorize a claim for court-ordered monetary relief.

In this particular case, the lower court granted the FTC’s request for a permanent injunction against the defendant for certain deceptive payday lending practices, but also relied on §13(b) of the Act to require the bad actor (defendant) to disgorge and pay US$1.27 billion in restitution. The defendant appealed to the Ninth Circuit Court of Appeals which rejected defendant’s argument that monetary relief is not within the Commission’s authority to enforce the Act.

The U.S. Supreme Court disagreed, holding that nothing in the statute explicitly authorizes the FTC to obtain court-ordered monetary relief under §13(b) and the structure and history of the Act precludes a finding that such relief available to the Commission.  This is a significant holding that clearly limits the FTC’s power to seek court-ordered monetary relief under §13(b) of the Act, from those alleged to be in violation of the Act.

You can read and download a copy of the decision in the case right here AMG Capital Management, LLC, et al., Applicants v. Federal Trade Commission, Certiorari to the United States Court of Appeals for the Ninth Circuit, No. 19-508 (Argued January 13, 2021; Decided April 22, 2021).

As always, if you want to know more about the information in this posting or if you have any questions, contact me, Joe Rosenbaum, or any of the lawyers at Rimon Law with whom you regularly work.

 

 

Posted on

“Family Office”? What’s In a Name

The Implosion Heard Around the (Financial Markets) World

What Can We Expect from the Regulators?

– Robin Powers, Partner, Rimon, P.C.

Archegos Capital Management’s collapse last week, and the resulting losses for several global banks, has and will impact financial markets for the foreseeable future. Regulatory efforts will likely focus on the ever-expanding shadow banking sector and shed light on its transparency (or lack thereof) and the risks. Shadow banking is a blanket term to describe financial activities that take place among non-bank financial institutions outside the scope of federal regulators and generally is defined to include family offices. *

Scrutiny of nonbanks was already a priority for Treasury Secretary Janet Yellen after last year’s Treasury market turmoil surrounding hedge funds, dislocations in the repurchase agreement market in 2019, and of course, the GameStop story earlier this year.

The current regulatory examination follows on the heels of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) (commonly referred to as Dodd-Frank) which overhauled financial regulation in the aftermath of the 2009 financial crisis. Under the Dodd-Frank legislation, family offices won a special carve-out from Congress that allows them to avoid SEC registration if they serve a single family and don’t give investment advice. Family offices made the case to Congress at the time that they only make conservative investments to preserve family wealth and they do not try to beat the markets. And so, despite managing around $10 billion, Archegos is not directly regulated by the SEC because it manages Hwang’s wealth as a single-family office.

CFTC Commissioner Dan Berkovitz said, “The collapse of Archegos Capital Management and the billions of dollars in losses to investors and other market participants is a vivid demonstration of the havoc that errant large investment vehicles called ‘family offices’ can wreak on our financial markets.” He added, “A ‘family office’ has nothing to do with ordinary families. Rather, it is an investment vehicle used by centimillionaires and billionaires to grow their wealth, reduce their taxes, and plan their estates.”

On March 31st U.S. Treasury Secretary Janet L. Yellen led the first meeting of the Financial Stability Oversight Council (FSOC) under the new Biden administration. The FSOC was scheduled to discuss hedge fund activity and analysts expect it also addressed Archegos.
As calls for closer scrutiny of the shadow banking sector grow louder, we can expect policymakers to revisit systemically important financial institution designations for nonbank financial entities. Being designated as systemically important would allow for tougher regulation and oversight from the Federal Reserve.

Want to know more.  You can always contact me, Joe Rosenbaum, about any posting on Legal Bytes, but if you want to know more about the content of this post or you need assistance, feel free to reach out to Robin Powers directly or any of the Rimon professionals with whom you regularly work.

* Over 10,000 family offices globally manage an estimated $5-15 trillion in assets – larger than the entire hedge fund industry. The largest family offices operate like sophisticated investment firms, but they don’t have the same oversight. Unlike hedge funds, family offices do not have to disclose their assets, bank relationships, and other operational information.
Posted on

U.S. Supreme Court Decides Oracle’s Copyright Infringement Case in Favor of Google

Google’s Copying of Oracle’s JAVA Code is a Non-Infringing Fair Use
– Eric C. Cohen, Special Counsel, Rimon, P.C.

In a decision ending almost 10 years of litigation, the U.S. Supreme Court held today that the incorporation of about 11,500 lines of Oracle’s Java Application Programming Interface (“API”) code into Google’s Android operating system is a fair use, and thus does not infringe Oracle’s copyright in its Java operating system. It did not decide the issue of whether the API code is copyrightable.

The facts in the case are fairly straightforward. To create the Android platform, Google programmers wrote millions of lines of new code, but because Google wanted all other programmers, already familiar with Java, to be able to work with its new Android platform, it copied roughly 11,500 lines of code from the Java SE program.” (Slip opinion at 3) The Court noted “Google copied that portion of the Sun Java API that allowed programmers expert in the Java programing language to use the “task calling” system that they had already learned,” (Slip opinion at 8) including code that labels and organizes tasks within the program.

The Court considered the fair use provision of the Copyright Act (17 U.S.C. § 107), and although questions of fair use necessarily involves findings of fact—the province of a jury—the ultimate question of whether those facts constitute fair use is a legal question for judges to decide de novo.* Application of the fair use doctrine includes consideration of four factors: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use on the potential market for and or value of the copyrighted work.

Considering the nature of the copyrighted work first, the Court held that the declaring code was “inextricably bound” with the idea of organizing tasks and with the use of specific commands that Oracle did not claim violated its copyright. The Court concluded this factor “points in the direction of fair use.” (Slip opinion at 24) Turning to the purpose and character of the use, the Court found Google’s use of the Java API sought to create new products – also favoring fair use. As to the amount and substantiality of the portion used, the Court noted that Google copied 11,500 lines of code out of about 2.86 million lines in the Sun Java API code, or about 0.4%. “The ‘substantiality’ factor will generally weigh in favor of fair use where, as here, the amount of copying was tethered to a valid, and transformative, purpose.” (Slip opinion at 29)

With respect to the “market effects” of Google’s use of the Java API, the Court noted the market for Java was primarily laptops and desktops and previous efforts to adapt Java for use in mobile phones had largely been unsuccessful. Google’s economic expert testified that Android was not a market substitute for Java’s software because the products operate on very different devices – presumably because Android was developed in order to operate efficiently on mobile devices, with far less processing speed and memory than desktop and laptop computers on which Java was designed to function. Considering the effect of programmers widespread knowledge of Java, the Court concluded that if they allowed enforcement of Oracle’s copyright claim it would effectively limit future creativity of new programs, a principle inconsistent with the basic creativity objectives of the Copyright Act.
You can read and/or download the entire Supreme Court decision right here:  2021.04.05 Oracle v Google SCOTUS Opinion Decision No. 18-956.

Need to know more about this decision and its implication. Need help, feel free to contact Eric C. Cohen directly. As always you can contact me, Joe Rosenbaum or any of the lawyers at Rimon Law with whom your regularly work.

* The Court cited its own decision in Markman v. Westview Instruments, Inc., 517 U.S. 370, 376 (1996)—a patent case—for the proposition that the Seventh Amendment does not include the right to have a jury resolve a fair use defense. This holding may become fairly significant for its potential application to the issue of obviousness in patent cases.

Posted on

Avoiding Risk and Fostering Innovation with Blockchain Patent Communities

Legal Bytes is proud to announce Marc Kaufman, Partner at Rimon, P.C., is moderating and participating in a panel discussion about the risks and rewards of blockchain technology. Currently, there are over 30,000 patent families worldwide directed specifically to blockchain technologies.
As a consequence and despite the broad use of open source software in blockchain ecosystems, patents present a significant risk to blockchain innovators and their investors.  However, there are various patent communities which can reduce the risk of excessive patent litigation for blockchain projects.

This panel will discuss the tapestry of patent communities available to blockchain innovators and how each community balances the rights of patent owners with the need for freedom to operate within the blockchain community.

Perianne Boring, President and Founder of the Chamber of Digital Commerce will be introducing the panel, and in addition to Marc Kaufman as moderator, panelists will include, William Geary of MPEG-LA, Ken Seddon of LOT Network, Jed Grant of the Open Crypto Alliance and Matthew Poppe also a partner at Rimon.

If you are interested in registering, there will be two sessions one on March 22, 2021 and another on March 24, 2021. You can find out more and register at Live Webinar: Avoiding Risk and Fostering Innovation with Blockchain Patent Communities.  Of course, if you need more information, you can contact Marc Kaufman directly.

Posted on

Investment Adviser Marketing – New Rules for a New World

SEC Amends Rules Applicable to Investment Adviser Marketing
– Niccolo Barber, Rimon Law

On December 22, 2020, the SEC amended the Investment Advisers Act of 1940, with respect to advertisements and payments to solicitors by investment advisers. The amendments create a single rule (“Rule”) that supplants the existing advertising and cash solicitation rules, marking the first time in more than 40 years the SEC has updated its rules governing adviser marketing.

Among the many amendments, the Rule promulgates new requirements relating to an adviser’s use of performance results in advertising materials. Advisers should keep the following points in mind moving forward:
• Gross vs. Net Performance Results. The Rule prohibits any presentation of gross performance in adviser advertisements unless the advertisement equally presents net performance figures. This restriction is predicated on the SEC’s concern that displays advertising of gross performance without any additional context, could create the impression that investors received the full amount of the presented returns shown. Accordingly, advisers should clearly indicate when performance results are portrayed on a gross basis. In addition, to facilitate investors’ understanding of the advertised performance results, net performance must be presented with at least equal prominence to gross performance results in a format designed to facilitate comparison between them.
• Hypothetical Performance. Advisers sometimes include hypothetical performance in their advertisements, such as model performance, back-tested performance, and targeted and projected performance returns. Although the Rule does not prohibit the use of hypothetical performance in advertising materials, it does prescribe significant conditions to its use based on the SEC’s belief that presentations of hypothetical performance pose a high risk of misleading investors. Specifically, an adviser may not utilize hypothetical results unless it: (i) has adopted and implemented policies and procedures reasonably designed to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience; (ii) provides sufficient information to enable the intended audience to understand the criteria used and the assumptions made in calculating the advertised hypothetical performance; and (iii) provides sufficient information to enable the intended audience to understand the risks and limitations of using hypothetical performance in making an investment decisions.
Of course, the above points are a high-level overview of the detailed requirements promulgated under the Rule. To read more about the Rule you can read my article entitled SEC Finalizes Amendments to Investment Adviser Advertising Rules and to read the full text of the Rule itself or download your own copy, check out SEC Final Rule – Investment Adviser Marketing. Should you have any questions about the Rule and its implications act on your advertising materials, contact me, Nicco Barber, or any of the Rimon lawyers with whom you regularly work.

 

Posted on

New York Post-Mortem Right of Publicity Signed into Law

Following up on our posting about rights of publicity in New York State (New York Moves to Expand the Right of Publicity), on November 30, 2020, Governor Cuomo signed S. 5959 into law and New York has finally joined the growing list of States in the United States to adopt and allow the enforcement of a post-mortem right. The legislation, which takes effect 180 days after it was signed (i.e., it only applies to individuals who die on or after that date), adds a new Section (50-f) to the New York Civil Rights Law entitled “Right of publicity” and deals with two categories of deceased persons: “deceased personalities” and “deceased performers.”

The new law in New York applies to deceased persons domiciled in New York State at the time of their death and creates a right of action for the use of names, voices, signatures, photographs or likenesses of “deceased personalities” for commercial purposes without consent and that right extends for 40 years after their death. The law defines a “deceased personality” as an individual “whose name, voice, signature, photograph or likeness has commercial value at the time of his or her death or because of his or her death”. Anyone claiming to represent these rights must register with the New York Secretary of State before making any claim. There are a number of exceptions to prohibited uses, so it is important to read and understand the statute carefully.

In deference to the world of virtual reality, the new law also provides a damage remedy for using a “deceased performer’s digital replica” in a “scripted audiovisual work as a fictional character” or in the “live performance of a musical work” without consent when the use “is likely to deceive the public into thinking it was authorized.” The law defines: (i) a “deceased performer” as someone who “for gain or livelihood was regularly engaged in acting, singing, dancing, or playing a musical instrument.”; and (ii) a “digital replica” as a computer-generated, electronic performance “that is so realistic that a reasonable observer would believe it is a performance by the individual.”

There are also a number of important exceptions to the prohibited uses enumerated in this portion of the new law, and also allows for “a conspicuous disclaimer” that appears in the credits of a scripted audiovisual work and corresponding advertising making it clear it has not been authorized.

For completeness, I should note there is also a section providing for a private right of action for unlawful “dissemination or publication of a sexually explicit depiction of an individual.” This relates to works that have come to be known as “deepfakes,” distributed without approval and although these might also be considered a “digital replica”, the law distinguishes the two categories and makes it clear consent is required and a disclaimer that otherwise might apply to digital replicas is not sufficient.

As you can appreciate, rights of publicity have often been the subject of controversy beyond the financial implications. For example, how does the law characterize a company’s creation and use of the likeness of an athlete or musician in a video game where the company may argue there is a First Amendment right of free expression – inconsistent with the rights of publicity. Again, the law is not always settled and the jurisdiction applicable to the deceased, the rights and the subject matter may well determine the outcome of any legal action. What about so called “industrials” in the entertainment business (e.g., content such as fitness and workout videos, dance instructional videos, company training content or instructions on product use and repair). Since these may not be characterized as either an advertisement or a product, it may not be clear if and how the law will be applied and certainly the answer will depend on these same jurisdictional factors.

For those of you who want context to the right of publicity, one of the first cases to deal with a post mortem right of publicity is the case involving Elvis Presley, whose brand even today is valued in the hundreds of millions of dollars. In this case (Estate of Presley v. Russen, 513 F. Supp. 1339 (D.N.J. 1981)) the court held that the right of publicity evolved from the common law of privacy and the corresponding tort “of the appropriation, for the defendant’s benefit or advantages, of the plaintiff’s name or likeness.” The term “right of publicity” has since come to signify the right of an individual to control the commercial value and exploitation of his name and picture or likeness and to prevent others from appropriating this value for their commercial benefit without their consent. This marks an interesting shift from the right of publicity being viewed as a personal right into a property right that can be exploited after a person’s death.

You can download and read a copy of the final bill here: New York State Rights of Publicity Bill S5959D Final. Of course, if you need more information about this post or have any questions, feel free to contact me Joe Rosenbaum or contact any of the Rimon Law professionals with whom you regularly work.

Posted on

NYS Power of Attorney Legislation

Governor Andrew M. Cuomo has signed legislation amending New York State’s law relating to power of attorney forms.  The legislation makes granting, using and understanding a power of attorney simpler and removes much of the complexity traditionally associated with individual powers of attorney in New York.  Under the previous statute, these forms could be invalidated on technicalities if the exact wording of the statute wasn’t followed. Furthermore, often the form was not easy to put into effect – especially if you didn’t have a lawyer there to help the grantor understand what they were signing and the powers they were agreeing to grant. A hardship to many vulnerable nursing home and assisted living residents – especially during this pandemic.

While understanding the implications and legal effect of granting a power of attorney is still an essential ingredient to effectiveness and enforcement, the new law, Chapter 323 of the 2020 Session Laws, becomes effective 180 days from December 15, 2020.  What’s changed?

  • The new law modifies the prior requirement of “exact wording” in the “Caution to the Principal” and “Important Information for the Agent” sections of a power of attorney. Although those sections are still required, the ‘exact language’ requirement has been replaced with a “substantially conforms” standard – making it less likely that innocuous and immaterial technical differences will invalidate the power;
  • The new legislation creates a presumption in favor of the validity of the power of attorney form and expressly provides that anyone accepting an acknowledged power of attorney with no actual knowledge the signature isn’t genuine, may rely on the presumption the signature is, in fact, genuine;
  • Although the unwillingness or inability of an agent to provide an opinion of counsel or certification is grounds to refuse to honor a power of attorney, if a third party has a good faith belief the power is valid and has no knowledge that it isn’t valid or the agent doesn’t have the authority for a particular act, they can now feel comfortable honoring the power of attorney in reliance on the agent’s authority. In fact, the new law allows a judge to impose penalties (including attorneys’ fees) if an institution unreasonably refuses to accept a presumptively valid power of attorney form;
  • One other welcome benefit of the new law. The statutory gifts rider has been eliminated and the authority to make gifts above “standard amount” is to be included in a modifications section in the power of attorney itself. If there is no gifting language in the modification, the authority to make gifts is now $5,000 in any calendar year (up from the previous $500).

To many, welcome and long overdue changes to the power of attorney law in New York State. You can read the amended version of the legislation that was signed by the Governor of New York State here:  NYS Power of Attorney Legislation.

As always, if you have questions about anything in this post, feel free to contact me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

 

Posted on

California CPRA – CCPA 2.0

On Election Day in California, voters will not only be determining choices among candidates standing for election, but they will also be deciding the fate of Proposition 24, referred to as the California Privacy Rights Act (CPRA).  Proposition 24 is intended to build upon the California Consumer Privacy Act (CCPA) that came into force at the beginning of 2020. Among other things, the CPRA would create a California Privacy Protection Agency, a new regulatory agency that would ultimately take over privacy enforcement responsibility from the Office of the California Attorney General.

Among the areas that would be affected by the CPRA would be a clear ban on discrimination against anyone choosing to ask a company to delete their information and opt-out of marketing communications, stronger rights to prevent data sharing by companies (e.g., cross-context behavioral advertising), clearer mechanisms to enable consumers to correct information that is not accurate and a requirement that companies tell consumers how long they plan to retain the information.

Proposition 24 would also legitimize marketing and promotional schemes that offer consumers a discount or access to benefits in exchange for voluntarily disclosing personally identifiable information (e.g., in the context of rewards or loyalty programs).  Privacy and data protection proponents and opponents have long debated whether consumers should have an option to pay for privacy – viewed as a logical consequence of offering benefits in exchange for information that can be used for marketing and promotional purposes.

Since the CCPA came into force, companies have already been scrambling to comply.  If Proposition 24 passes and CCPA 2.0 comes into force, companies will again have to review and likely revamp their policies and practices to deal with the added new compliance obligations. Just as significantly, a separate California Consumer Privacy Agency would likely end up brining many more enforcement actions since protecting the privacy rights of California consumers will be its only mission.  Proponents of Proposition 24 say that may well be a good thing for California consumers, but they also argue that an agency solely focused on data protection will also mean more clarity, consistency and guidance surrounding some of the nuances of the California requirements.

Stay tuned. Election day is only a week away.

Posted on

New York Moves To Expand the Right of Publicity

As New York law currently stands basically the only right of publicity that is recognized in New York is the right to prevent appropriation of a living person’s name or likeness (e.g., portrait, picture, image) for commercial purposes.  A violation of the law can have both criminal and civil consequences, although only civil actions currently include the misappropriation of ones’ “voice,” in addition to names and photographs. New York courts have also allowed claims based on the use of look-alike models (Onassis v. Christian Dior-New York, Inc., 472 N.Y.S2d 254 (N.Y. Sup. Ct. 1984)).

New York does not recognize any common law right of publicity (Stephano v. News Group Publications, 474 N.E.2d 580 (N.Y. 1984)). Consequently all New York rights of publicity are purely creatures of statutory law.  Of interest in recent years is the fact that unlike over 20 other States in the United States and many jurisdictions internationally,* New York has never recognized any post-mortem rights of publicity. In other words, only living New York persons have any right of publicity and those are governed exclusively by statute!

Well that may change if and when New York State Governor Andrew Cuomo signs a bill recently passed by both houses of the the NYS legislature and although the bill differentiates between “deceased personalities” and “deceased performers,” if signed into law it would broaden the current law and create a new transferable (and inheritable) right that would protect those rights of publicity after death – rights that would last for 40 years after the death of the individual.

This new legislation is likely to have implications to performers, celebrities and others who are domiciled in New York, as well as to advertisers, advertising agencies and sponsors, among others.  Once the bill is signed into law, watch for updates on Legal Bytes for more detail. In the meantime, if you have questions or want more information, feel free to contact me, Joe Rosenbaum or any of the Rimon lawyers with whom you regularly work.

* Note: In some jurisdictions, rights of publicity are referred to as “personality rights” and one should never assume these rights are identical in scope or effect.