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Taxing Storm Clouds Gather Over Utah

In June 2010, we announced the launch of an initiative focusing on Cloud Computing (‘Transcending the Cloud’ – Rimon Announces White Paper Series & Legal Initiative on Cloud Computing), showcased with a series of individual and topical white papers, in time being compiled into a comprehensive work entitled, “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing.” One of the first in our series was a paper on the state tax implications of cloud computing, entitled: “Pennies From Heaven”

Just as clouds have different shapes, sizes and shades of gray, different states are approaching taxation of cloud transactions differently. Well now, our State Tax practice reports that taxing storm clouds are gathering over Utah. In a marked about-face from the state’s previously issued guidance, the Utah Sales Tax Commission has ruled that web services that charge a fee constitute sale of a service, subject to sales tax. The implication being that mere access of or to an application is enough to subject the provider to a tax liability.

Notable for cloud computing providers, even though the product at issue was access to remotely hosted software that allowed users to conduct webinars "in the cloud," allowing customers to download a free device application for access to that service had the state seeing "software" (sales of which are subject to sales tax in Utah). With at least one state looking at clouds from the application side now, it will be interesting to see if other states quickly follow.

For more information about the Utah ruling, or to stay on top of the developments in the taxation cloud products and platforms, visit www.taxingtech.com. To get legal assistance and guidance from someone who really knows that state of state taxation of cloud computing, contact 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, Joseph I. ("Joe") Rosenbaum, or the Rimon attorney with whom you regularly work.
 

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Useless But Compelling Facts – December 2011 Answer

As 2011 came to a close, with the buzz and frenzy over the upcoming Facebook (www.Facebook.com) IPO, we asked you to tell us the first company in the world that ever issued stock, where it was incorporated, the year stock was issued, whether it paid a dividend and whether it – or actually a successor corporation – is still around.

Drum roll . . . . . .

The Dutch East India Company (in Dutch: Vereenigde Oost-Indische Compagnie, VOC) was established in 1602, and although one other company had been chartered (incorporated) before it, the Dutch East India Company was the first to issue stock. Perhaps the quasi-sovereignty of Google (www.Google.com), Facebook (www.Facebook.com) and other mega-corporations should not be so surprising since my own research uncovered the fact that its charter permitted the company to wage war, imprison and execute convicts, negotiate treaties, and even establish colonies and coin money. And that was in 1602! It must have been doing something right back then because the Dutch East India Company actually paid an 18 percent annual dividend for almost 200 years. Unfortunately, the company became fraught with corruption and by 1800, having gone bankrupt, it was formally dissolved as a corporation, with its land holdings becoming the Dutch East Indies which, over the course of ensuing centuries, expanded into what is now known as Indonesia.
 

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German Court Requires Facebook to About Face

This post was written by Katharina Weimer.

A German Court thinks it may be time to de-friend Facebook. On 6 March 2012, the Regional Court in Berlin took a rare opportunity to rule on several features available on the social media platform Facebook, and not surprisingly opined that Facebook needs to provide more transparency and ask for consent when using users’ information. Worded in the form of consents, the German Court held:

  • Consent No. 1: Facebook may no longer make available one of its most used features, the “friend finder,” without proper information of the user and consent of the user’s contacts who are invited to join Facebook via email
  • Consent No. 2: The exploitation of user content that is protected by intellectual property rights requires affirmative and specific user consent. The language purporting to grant Facebook a comprehensive, worldwide, royalty-free license that is incorporated into Facebook’s existing terms of use is not sufficient.
  • Consent No. 3: Facebook needs to reword its consent regarding the use of personal data for advertising purposes

Although the judgment is technically not legally binding as yet, Facebook announced it will carefully review the consequences and consider legal remedies once the judgment is available in full length. This decision may lead the way to more transparency and user control over social media and the use of information in Germany. Having a world of information at your fingertips and incorporating user content in Web 2.0 services is a great tool for user interaction and learning more about them, but the court’s ruling suggests that Facebook not forget for whom their service was created – the users, not the advertisers. As Facebook edges closer to an IPO and looks to monetize its services and features, the German Court’s view is that Facebook needs to continue to give its users control over their content and information. Stay tuned to Legal Bytes for more details as the court proceedings continue.

Vielen dank (many thanks) to Katharina Weimer for the insights and the update. If you need legal or regulatory counsel, contact Katharina directly, or you can always contact me, Joseph I. (“Joe”) Rosenbaum, or the Rimon lawyer with whom you regularly work.

Eleanor Roosevelt

“Great minds discuss ideas; average minds discuss events; small minds discuss people.”

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White House Releases Privacy Report and Calls For a Consumer Bill of Rights

Earlier today, Secretary of Commerce John Bryson and Federal Trade Commission Chairman John Liebowitz outlined the Obama administration’s strategy for ensuring “consumers’ trust in the technologies and companies that drive the digital economy.” On the heels of their announcement, and although it is dated January 2012, the Department of Commerce released a long-awaited report entitled “Consumer Data Privacy in a Networked World, A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy,” the administration’s roadmap for privacy legislation and regulation in the years ahead.

The announcement and privacy blueprint envisions a comprehensive and integrated framework for data protection, rather than the current sector-patchwork-quilt approach, and is comprised of four key pillars: (1) a consumer privacy bill of rights; (2) a multi-stakeholder process and approach dealing with how such a bill of rights would apply in a business context; (3) more effective enforcement; and (4) greater commitment to harmonization and cooperation in the international community.

The Report outlines the seven principles of its proposed Consumer Privacy Bill of Rights and, although calling for legislation and regulation to codify and memorialize these rights, also sets out consumer privacy standards that companies are asked to immediately and voluntarily adopt in a cooperative public-private partnership. These seven principles are:

  1. Individual Control Through Choice
  2. Greater Transparency
  3. Respect for Context
  4. Secure Handling
  5. Access & Correction Rights
  6. Focused Collection
  7. Accountability

The Report notes that a company’s adherence to the voluntary codes will be viewed favorably by the FTC in any investigation or enforcement action for unfair and deceptive trade practices. By implication, a company that does not adopt and follow these principles might be used as evidence of a violation of Section 5 of the FTC Act, even if federal legislation is not passed on the subject. The FTC is expected to soon release its Final Staff Report on Consumer Privacy that will be consistent with the Obama administration’s proposed Framework Report. The report reinforces the administration’s commitment to international harmonization, and also touches upon the role state attorneys general in the United States can play. While we are still reviewing the details – and more will likely be forthcoming from the administration in the weeks and months ahead – Legal Bytes will keep you on top of these developments as they arise.

You can read the entire report right here: Consumer Data Privacy in a Networked World, A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy.

These are developments that affect all businesses, domestic and multi-national, global and local, consumers and regulators. The complexity and challenges of compliance should not be underestimated, nor should the administration’s commitment to follow the roadmap outlined. Rimon has teams of lawyers who have experience and follow developments in privacy and data protection, from prevention and policy to compliance and implementation. If you want to know more, need counsel, need help navigating, or if you require legal representation in this or any other area, feel free to call me, Joseph I. (“Joe”) Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

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2012 ANA Conference – Gnu & Gnoteworthy

Learn what you need to know to stay on the cutting-edge of today’s regulatory and legal issues at the 2012 ANA Advertising Law & Public Policy Conference in Washington, D.C., March 28-29. Hear from two top regulators, FCC Chairman Julius Genachowski and FTC Commissioner Julie Brill; and a leading member of the judiciary, Chief Judge Randall Rader of the U.S. Court of Appeals for the Federal Circuit and a noted IP expert. Topics will include:

  • A session on FTC cases involving two major marketers – Dannon and Reebok – featuring both in-house and outside counsel representing both companies
  • The most recent news from Congress and the agencies
  • The future of the Internet after ICANN’s plan to open up the top-level domain space
  • What’s next in the online piracy fight post-SOPA/PIPA, and the future of online governance

Continuing Legal Education (CLE) credits will be available.

To view the agenda, please visit ANA’s website; and if you have questions, feel free to contact my partner, Douglas J. Wood, who is Co-Chairing the Conference, or me (Joseph I. Rosenbaum), or any Rimon attorney with whom you regularly work.
 

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Robocop Fights Robocalling

In the 1987 film "Robocop", directed by Paul Verhoeven, a terminally wounded cop returns to the police force as a powerful cyborg, albeit with haunting memories, to fight crime and evil. Fast-forward to 2012 and "robo calling."

One of the government’s main consumer cops, the Federal Communications Commission, has acted to tighten rules regarding the use of so-called "robo calling" (ok, it’s auto-dialing systems). The FCC’s official order has not been released, but the following is clear:

  • Express written consumer consent in advance will be required before using an autodialer or prerecorded message
  • You can no longer rely on an "established business relationship" as an exception to the prior written consent requirement
  • Each robocall must include an automated opt-out mechanism
  • Rules governing abandoned or "dead air" calls will be tightened

When the final regulations and order designating the effective date and detailing precisely how these rules will be applied are released, we’ll bring you the news; but in the meantime, you can read more about the FCC’s action and its thinking right here: FCC Approves Order to Tighten Regulatory Treatment of Robocalls Under the Telephone Consumer Protection Act.

As always, if you need legal or regulatory counsel, call me, Joseph I. ("Joe") Rosenbaum, or any of the lawyers highlighted in the full client alert, or, of course, the Rimon lawyer with whom you regularly work.

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Stealing Limelight from Hollywood, California Shines the Light on Privacy

California’s Shine the Light Act, California Civil Code 1798.83, responded to the perceived need for transparency and provides consumers certain rights in connection with how businesses share information about California residents for purposes related to direct marketing. The regulatory team at Rimon has prepared a Rimon Shine the Light Act Reference Guide; and while the Act doesn’t apply to every business, if it does apply, liability may be as high as $3,000 per violation. You can view the entire blog posting on our sister GRE Law Blog.

As always, if you need guidance from lawyers who have experience and resources aligned to deal with these issues, call me, Joseph I. (“Joe”) Rosenbaum; any of the lawyers highlighted in the posting; or, of course, the Rimon lawyer with whom you regularly work.

Albert Einstein

“We can’t solve problems by using the same kind of thinking we used when we created them.”