Topic: Legal

Legal side of Reputation Management

New Hampshire Cryptocurrency Law: Registration Exemption 0

New Hampshire Cryptocurrency LawThe New Hampshire cryptocurrency law is fintech-startup-friendly.

Lawmakers passed a statute that fertilizes the state’s legal soil for blockchain and virtual currency businesses.

New Hampshire Cryptocurrency Law: Registration Exemptions

Granite State legislators updated existing regulations that currently require “money transmission companies” and certain financial professionals to register with a regulatory body. The new law removes this requirement for parties engaged “in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency or receive convertible virtual currency for transmission to another location.”

New Hampshire Cryptocurrency Law: Fixed 2015 Measure

The latest statute fixed a 2015 measure that chucked cryptocurrency businesses under the purview of state banking authorities, making New Hampshire unattractive to emerging fintech operations. At least one company fled the state on account of the 2015 vote.

New Hampshire Cryptocurrency Law: Close Vote

Not a runaway decision, lawmakers were split on the latest New Hampshire cryptocurrency statute, garnering a 185-170 vote in the house, and a 13-10 count in the Senate.

Connect With A Cryptocurrency Lawyer

Kelly / Warner works with cryptocurrency entrepreneurs and blockchain companies on everything from registration to contract negotiations to litigation. If you have questions regarding any aspect of virtual currency law or initial coin offering legalities, get in touch. We’re ready and waiting, with answers and guidance.

Article Sources

Doherty, B. (2017, June 13). New Hampshire Exempts Bitcoin and Other Virtual Currency Businesses from Money Transmitter Regulation. Retrieved September 05, 2017, from http://reason.com/blog/2017/06/13/new-hampshire-exempts-bitcoin-and-other

The post New Hampshire Cryptocurrency Law: Registration Exemption appeared first on Kelly / Warner Law | Defamation Law, Internet Law, Business Law.


Source: Kelly Warner Law

Facebook Wins Appeal Over Allegedly Discriminatory Content Removal–Sikhs for Justice v. Facebook 0

[It’s impossible to blog about Section 230 without reminding you that Congress is on the cusp of gutting it.]

I previously summarized this case:

Sikhs for Justice (“SFJ”) is a human rights group advocating for Sikh independence in the Indian state of Punjab. It set up a Facebook page for its organization. SFJ alleges that, in May, Facebook blocked its page in India at the Indian government’s behest. Facebook allegedly did not restore access to the page despite repeated requests, nor did it provide any explanation for the page block. SFJ sued Facebook for several causes of action, including a federal claim of race discrimination.

Judge Koh granted Facebook’s motion to dismiss on Section 230 grounds. The Ninth Circuit affirmed in a short non-precedential memo opinion. The court’s entire discussion about Section 230:

The district court properly dismissed Sikhs for Justice, Inc.’s (SFJ) discrimination claim under Title II of the Civil Rights Act of 1964. The Communications Decency Act (CDA) provides interactive computer service providers immunity from civil liability when the claim is premised upon the provider’s role as “the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1), (c)(2). “This grant of immunity applies only if the interactive computer service provider is not also an ‘information content provider,’ which is defined as someone who is ‘responsible, in whole or in part, for the creation or development of’ the offending content.” Fair Housing Council of San Fernando Valley v. Roommates.Com, LLC, 521 F.3d 1157, 1162 (9th Cir. 2008) (en banc) (quoting 47 U.S.C. § 230(f)(3)).

Here, it is undisputed that Facebook is an interactive computer service provider. SFJ seeks to hold Facebook liable as a publisher for hosting, and later
blocking, SFJ’s online content. See Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1103 (9th Cir. 2009), as amended (Sept. 28, 2009) (“removing content is something
publishers do”). But SFJ, not Facebook, is the party solely responsible for creating and developing the content on SFJ’s webpage. As such, Facebook cannot be deemed an “information content provider,” and it is therefore entitled to the immunity conferred under § 230. Moreover, we have found no authority, and SFJ
fails to cite any authority, holding that Title II of the Civil Rights Act of 1964 provides an exception to the immunity afforded to Facebook under the CDA.

Because SFJ’s Title II claim is barred by the CDA, granting SFJ leave to amend its complaint would have been futile. As a result, the district court properly
dismissed SFJ’s Title II claim with prejudice.

The appeals court sidesteps the (c)(1) vs. (c)(2) distinction that Judge Koh’s opinion collapsed. In theory, Facebook’s removal of the Sikhs for Justice page should be covered by Section 230(c)(2), which applies to a service’s filtering decisions, i.e., the decision to block content. Instead, Judge Koh ruled for Facebook on Section 230(c)(1) grounds. 230(c)(1) says websites aren’t liable for third party content, and here the “third party” content is the plaintiff’s content, not content from a independent non-litigant. This is a good outcome for Section 230 defendants, but it does seem to highlight Section 230(c)(2)’s increasing irrelevance.

The appeals court’s opinion unambiguously states that Section 230 applies to Title II discrimination claims. This isn’t unprecedented; the 2003 Noah v. AOL opinion said the same thing. Still, it was clear that the Ninth Circuit was troubled by the application of Section 230 to housing discrimination claims in the Roommates.com case. Nearly a decade later, the intersection between Section 230 and discrimination claims apparently generates far less angst in the Ninth Circuit.

Case citation: Sikhs for Justice, Inc. v. Facebook, Inc., 2017 WL 4118358 (9th Cir. Sept. 13, 2017)


Source: Eric Goldman Legal

No “Contract By Tweet” for Plaintiff Who Pitches Movie Idea via Social Media 0

Screen Shot 2017-09-10 at 5.16.43 PMThis is an idea theft case based on the idea behind “Creed” the movie, a spinoff of the famous Rocky movies.

Jarrett Alexander alleged that he came up with the idea for Creed, drafted the screenplay, and put together a pitch reel that he initially posted on Vimeo and then on a separate website. He also alleged he circulated the idea and the pitch reel to various industry types, including those associated with the original Rocky movies. He also tried to raise awareness for the idea on social media by promoting the idea on Twitter. Plaintiff and his friends tweeted at The Rock (who is friends with Stallone), to Carl Weathers (who played Creed in the Rocky movies) and to Sylvester Stallone himself. The complaint did not allege that any recipients acknowledged the tweets or took action based on them. Sometime later, MGM and Stallone announced their plans to develop Creed, which plaintiff alleges bears thematic similarities to plaintiff’s own idea.

Misappropriation of idea claim: the court says this tort is recognized in certain narrow situations and requires either confidentiality or a contractual promise. An idea itself is not protectible. Confidentiality is obviously not available given public dissemination of the idea. The court thus looks to the second possibility.

Implied contract: The court says an implied contract claim requires plaintiff to show that he prepared the work and offered it to defendants under circumstances that would reasonably be understood to require compensation upon use of the work (i.e., he needed to satisfy the typical elements of contract formation). The court is skeptical that plaintiff’s tweets satisfy this standard. Plaintiff falls back on custom of the industry and says he understood based on industry custom that he would be compensated. The court says this theory fails as well:

while requiring an in person meeting for misappropriation of idea claim in the world of movie and television pitching may be unrealistic in light of communication and social media advancements, plaintiff’s theory of implied contract by tweet and by mass-mailing of the screenplay might turn mere idea submission into a free-for-all.

The court identifies other problems with the plaintiff’s theory as well (1) he doesn’t identify any terms that he appended to the submission, and (2) he cites to no exchange whatsoever with the defendants in which terms were discussed. The court also cites to a widely-cited appropriation case:

the idea man who blurts out his idea without first having made his bargain has no one but himself to blame for the loss of his bargaining power. The law will not in any event, from demands stated subsequent to the unconditioned disclosure of an abstract idea, imply a promise to pay for the idea…

Unjust enrichment claim:  The court cites to similar flaws and dismisses his unjust enrichment claim.
___

We haven’t seen many idea submission cases where an idea is submitted over social media. While in a totally different context, and a unilateral contract case, this case reminded me of the YouTube rewards case, where the court said a rewards offer broadcast on YouTube was an offer that could be accepted by performance: “A Reward Offer Still An Offer, Even if It’s Made on YouTube – Augstein v. Ryan Leslie“.

The court recognizes all sorts of mischief that could be wrought by recognizing these types of claims absent some sort of acknowledgment from the defendant(s). It would have been interesting to see what the result would have been if Carl Weathers, the Rock, or Stallone responded to the tweets in some way (such as by faving or retweeting, or responding). A gesture such as that is probably innocuous and would not have moved the needle on this claim, but the absence of such a gesture made the case particularly easy.

The court flagged that while an idea misappropriation claim is not recognizable without confidentiality or some contractual hook, standing on its own, it’s also preempted by copyright. This made me wonder whether plaintiff considered this route. Not that it would have been meritorious, but since the plaintiff asserted a slew of other claims you’d think he would have thrown it in as well.

This case was a long shot at best, made intriguing only by the alleged similarities between plaintiff’s idea and the movie ultimately developed by Stallone & co.
___

Eric’s Comments:

1) I think the world would be a better place if we permanently eliminated any “idea submission” doctrines. I’m fine with other torts applying if the requisite elements are met, such as trade secrets, contract law or copyright law. However, a standalone “idea submission” doctrine is invariably unmeritorious–and pernicious.

2) This is not Stallone’s first time being sued for using someone’s movie ideas related to the Rocky character. Some IP Survey casebooks, including the Merges, Menell, and Lemley book, include the Anderson v. Stallone ruling over Rocky IV. In that case, Stallone was quoted in the press describing his vision for Rocky IV (remember, the one with Dolph Lungren, the killer Russian robot?), Anderson incorporated those ideas into a treatment he wrote on spec, Anderson pitched the treatment to studio executives and eventually Stallone but made no sale, then he sued for copyright infringement based on the similarities between the treatment and the movie. The court held that Anderson never had a copyright license to create a derivative work, the treatment was a derivative work of the Rocky characters, and Anderson didn’t have any copyrights to the unauthorized derivative work. The net effect of the court’s ruling is that Stallone could freely take whatever he wanted from Anderson’s treatment. Assuming this is good law, this still leaves open the strange pattern that the Rocky sequels have produced two completely independent lawsuits that Stallone “borrowed” from others. Maybe this is just coincidence…
___

Case citation: Alexander v. MGM, CV 17-3123-RSWL-KSx (C.D. Cal. Aug. 14, 2017). The initial complaint

Related posts:

* A Reward Offer Still An Offer, Even if It’s Made on YouTube – Augstein v. Ryan Leslie
* Appeals Court: Accepting Lawyer’s Prove-me-Wrong Challenge Does not Form a Contract
* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract — CX Digital v. Smoking Everywhere


Source: Eric Goldman Legal

Catching Up on Ninth Circuit CFAA Jurisprudence (Internet Law Casebook Excerpt) 0

[Eric’s note: this is another excerpt from my Internet Law casebook. Venkat and I couldn’t blog last year’s chaotic and messy Ninth Circuit’s CFAA jurisprudence in real time. I nevertheless took one for the team and tried to make sense of the mess in the casebook. Here’s what I came up with:]

CFAA in the Employment Context. It’s fairly common for departing employees to take company files with them electronically. They may email the files to their personal email accounts, or they may download the files to a flash drive. Often, such activities constitute trade secret misappropriation, but let’s put the trade secret issue aside for a moment. Let’s also assume that the employee hasn’t hacked the system to obtain files that the employee wasn’t meant to access. Does the emailing/downloading of company files for non-company purposes constitute a misuse of the company’s equipment such that it becomes a CFAA violation?

This issue has vexed the courts. Several appellate courts, including United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (en banc) (“Nosal I”) and WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199 (4th Cir. 2012), held that an employee who initially had authorization to access the company’s computers did not “exceed authorized access” by downloading files for improper purposes. Courts do not uniformly follow this view, however.

The Nosal case shows the courts’ struggles with applying the CFAA in employment contexts. The Ninth Circuit explained:

Nosal worked at the executive search firm Korn/Ferry International when he decided to launch a competitor along with a group of co-workers. Before leaving Korn/Ferry, Nosal’s colleagues began downloading confidential information from a Korn/Ferry database to use at their new enterprise. Although they were authorized to access the database as current Korn/Ferry employees, their downloads on behalf of Nosal violated Korn/Ferry’s confidentiality and computer use policies….When Nosal left Korn/Ferry, the company revoked his computer access credentials, even though he remained for a time as a contractor. The company took the same precaution upon the departure of his accomplices, Becky Christian and Mark Jacobson.  Nonetheless, they continued to access the database using the credentials of Nosal’s former executive assistant, Jacqueline Froehlich-L’Heureaux (“FH”), who remained at Korn/Ferry at Nosal’s request.

In 2012, the court held that that § 1030(a)(4)’s “exceeds authorized access” language “does not extend to violations of [a company’s] use restrictions.” United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (en banc).

Nosal’s win was short-lived. Prosecutors pursued Nosal on other aspects of the CFAA, and the case went back to the Ninth Circuit. United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016) (“Nosal II,” as amended in December 2016). In Nosal II, the court said “we are asked to decide whether the ‘without authorization’ prohibition of the CFAA extends to a former employee whose computer access credentials have been rescinded but who, disregarding the revocation, accesses the computer by other means.” The court held that, by instructing Jacqueline to act as his proxy, Nosal disregarded the former employer’s revocation of his access rights—even though Jacqueline (as a current employee) still had authorized access to the system.

Perhaps Nosal II is sufficiently fact-specific that it doesn’t undermine the broader principles articulated in Nosal I. Arguably, the case turned on Jacqueline’s provision of her passwords to departed employees whose system access had been expressly revoked. Still, the courts’ statutory construction remains highly confused and confusing.

In addition to the CFAA conviction, Nosal was convicted of criminal trade secret misappropriation. If trade secret law already protected Nosal’s former employer, why is the overlay of CFAA criminal law even needed in his circumstance?

Cease-and-Desist Letters Revoking Authorization. Power Ventures operated a service designed to aggregate a user’s social networking content from multiple social networking sites, including Facebook. At users’ request and using their login credentials, Power Ventures used automated scripts to log into a user’s Facebook account and download/upload content for the user. Facebook allowed third party services to perform such functions using a service called “Facebook Connect,” but Power Ventures did not use Facebook Connect. As a result, Facebook sent cease-and-desist letters and blocked Power Ventures’ IP addresses. Neither effort worked. The the parties ended up in court, leading to a Ninth Circuit opinion. Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058 (9th Cir. 2016).

The Ninth Circuit recaps the general principles:

First, a defendant can run afoul of the CFAA when he or she has no permission to access a computer or when such permission has been revoked explicitly. Once permission has been revoked, technological gamesmanship or the enlisting of a third party to aid in access will not excuse liability. Second, a violation of the terms of use of a website—without more—cannot establish liability under the CFAA.

The court says that Power Ventures might have had implied authorization to access Facebook’s service, especially given the users’ requests for it to do so. However, “Facebook expressly rescinded that permission when Facebook issued its written cease and desist letter to Power on December 1, 2008….The consent that Power had received from Facebook users was not sufficient to grant continuing authorization to access Facebook’s computers after Facebook’s express revocation of permission.” The Ninth Circuit also confirmed that Power Ventures violated the applicable state computer crime law, California Penal Code § 502.

While cease-and-desist letters usually are pretty clear about what the sender wants the recipient to do (or not do), cease-and-desist letters often demand remedies that would not be obtainable if litigated in court. In other words, they are often the sender’s wish list, maybe only loosely tethered to what the law actually provides. If so, does it make sense for the Ninth Circuit to treat cease-and-desist letters as dispositive on the CFAA “authorization” question? Recall that CFAA violations can be criminal, so the Ninth Circuit seems to be saying that a company’s private cease-and-desist letter can convert legal behavior into illegal behavior.

Interestingly, the court says (in a footnote) that cease-and-desist letters are more consequential than a service’s technological self-help via IP address blocks:

Simply bypassing an IP address, without more, would not constitute unauthorized use. Because a blocked user does not receive notice that he has been blocked, he may never realize that the block was imposed and that authorization was revoked. Or, even if he does discover the block, he could conclude that it was triggered by misconduct by someone else who shares the same IP address, such as the user’s roommate or co-worker.

What do you think of this differential treatment of IP address blocks and cease-and-desist letters?

On remand, the district court awarded about $80,000 of damages ($5k of remediation efforts post-C&D letter plus $75k of legal costs negotiating with Power Ventures) and issued a permanent injunction. Facebook, Inc. v. Power Ventures, Inc., 2017 WL 1650608 (N.D. Cal. May 2, 2017).

[Note: the hiQ v. LinkedIn ruling, which came after publication, would be relevant to this discussion, though I remain skeptical it will survive intact if appealed.]


Source: Eric Goldman Legal

An Everyman’s Introduction To Initial Coin Offerings 0

initial coin offerings Bitcoin, Ether, Litecoin! What are these superhero-sounding currencies and the initial coin offerings in which they figure? Let’s get to it (in plain English).

What are cryptocurrencies?

(Crypto-whaaaa!?) Cryptocurrency platforms are decentralized peer-to-peer payment networks. Unlike national — a.k.a., fiat — currencies (i.e., Dollar, Yen, Ruble) cryptocurrencies aren’t tied to a particular country; nor are they physically circulated via “cash.”

Bitcoin was the first significant cryptocurrency to hit the market.

What Is The Main Difference Between Cryptocurrencies and Traditional Banks?

Cryptocurrencies, like Bitcoin, are built with blockchain technology, allowing for decentralization and superior security. Blockchain-based systems produce ongoing public ledgers of all transactions executed on a given platform. Moreover, once something is “recorded,” it can’t be undone.  Traditional banks, on the other hand, are centralized and only allow account holders to see transactions in a statement.

How are cryptocurrencies generated?

Millions of calculations must be completed, daily, for cryptocurrency systems to function. Computers that solve these calculations earn tokens. The process is called mining, and it’s how digital currencies, like Bitcoin, are generated.

Think of it this way: Back in the day, prospectors mined gold; today’s prospectors use their computers to mine Bitcoin and other cryptocurrencies.  Some miners even combine their resources into “mining pools,” which some folks claim is the most efficient way to earn tokens.

What are Altcoins?

In the cryptocurrency world there is Bitcoin, and Not-Bitcoin.  Anything that isn’t Bitcoin is considered an “altcoin.”

Who can create a cryptocurrency?

Anybody. That’s right; you and nearly everyone you know can create a cryptocurrency.   A lot of startups use Ethereum’s smart contract platform to launch ICO’s, which we will discuss more below.

What is an ICO?

ICO stands for Initial Coin Offering. Similar to IPOs (Initial Public Offerings), startups solicit funding by selling unique tokens. The tokens are integral to the project, but can also be traded on exchanges.  How does it typically work? Let’s look at how some ICO’s use Ethereum’s platform.

  • One: A startup creates a unique token — a.k.a., altcoin — using Ethereum’s platform.
  • Two: The startup holds an initial coin offering where the public can buy the altcoin using Bitcoin or another established virtual currency, like Ether.
  • Three: The startup exchanges the Bitcoin or Ether it raised — and voila, the project is funded.

The above may be an oversimplification of initial coin offerings, but it lays the groundwork for understanding the niche. In a nutshell just think of ICOs as the love child of crowdsourcing and IPOs.

To avoid the wrath of the SEC and/or CFTC, ICO’s should avoid using the term “investment” or “invest” in marketing materials. 

How Common Are ICOs?

So far, in 2017, startups have raised over $320 million in ICOs. It’s outpacing venture funding, which is weighing in at $295 million for the same term.

Why do people invest in ICOs?

You may be cocking your head to one side, throwing the screen a side-eye, and thinking: Isn’t investing in ICOs ridiculously risky!? How can anyone benefit from made-up money!?

Those are fair questions. After all, not all startups succeed.

On the other hand, some startups hit it out of Fenway. (Ethereum’s ICO was originally priced at .0005 Bitcoin per ETH; at the time of this writing the ratio is .0819 Bitcoin per ETH.) So, if you participate in the “next Amazon’s” ICO, you stand to rake in millions.

Are cryptocurrencies considered “securities” subject to SEC oversight?

Though judges have christened crypto investment packages as “securities,” the jury is still out as to whether or not virtual currencies are inherent securities.

Judges use the Howey test to determine whether or not a cryptocurrency product or investment opportunity qualifies  as a security. (SEC v. Howey)

Howey was a slick entrepreneur who owned a Florida orange grove.  He invited people to tour his orange grove and buy one-acre plots. After someone bought, Howey made them sign a land maintenance contract.

Well, the SEC took Howey to court, claiming that his arrangement was actually an investment contract and thus a security.  SCOTUS developed a test to establish the existence of a security.

  1. Someone must invest money;
  2. In a common enterprise;
  3. Where there is an expectation of profit that comes from the efforts of others.

If, however, legislators update language in the Securities Act of 1933 and Exchange Act of 1934, the Howey standard could change.

Risks associated with cryptocurrencies

A huge ambiguity currently taunting cryptocurrencies is classification. The legal status of virtual monetary systems is still up for debate. If the courts eventually deem them subject to the Securities and Exchanges Acts, the industry won’t be recognizable, and the profit potential may plummet.

Anticipating looming regulations, startups are structuring ICOs to comply with SEC exemptions. Some businesses are avoiding the US altogether by restricting investment access.

Fraud is another looming issue. Speculation is ripe, and the industry is nascent, so people are looking at ways to game it.

Connect With An Initial Coin Offerings Lawyer

Are you wrestling with a cryptocurrency legal issue? Want to chat with an attorney about the ins-and-outs of blockchain technology and initial coin offerings? Either way, we’re here and ready. Get in touch today to begin the conversation.

Article Sources

Kim, R. (2017, June 13). Initial Coin Offerings: A Growing Method For Blockchain Startup Financing. Retrieved September 03, 2017, from https://www.bna.com/initial-coin-offerings-n73014453179/

Sharma, R. (2017, June 14). Blockchain ICO Offerings Have Outpaced VC Funding This Year. Retrieved September 04, 2017, from http://www.investopedia.com/news/blockchain-ico-offerings-have-outpaced-vc-funding-year/

Roberts, D. (2017, June 21). Everything you need to know about initial coin offerings. Retrieved September 04, 2017, from https://finance.yahoo.com/news/everything-need-know-initial-coin-offerings-123332195.html

The post An Everyman’s Introduction To Initial Coin Offerings appeared first on Kelly / Warner Law | Defamation Law, Internet Law, Business Law.


Source: Kelly Warner Law