Law, Technology & Arts Blog

Investing In Alibaba Group: Sure Payoff Or Legal Nightmare?

Posted in Commerce, Government and Regulation by LTA-Editor on October 24, 2014

Screen Shot 2014-10-24 at 7.33.18 PMBy Yayi Ding

Last month, Chinese e-commerce giant Alibaba Group announced one of the biggest initial public offerings (IPOs) in US history, raising more than $21 billion USD. However, one could argue that the entire scheme might have been borderline illegal; of all the investors who “purchased” Alibaba’s stocks at IPO, none of them ended up actually owning a single share in Alibaba.

How could this be? Well, for starters, Chinese government regulations do not allow foreigners to own stock in Chinese Internet companies, Alibaba included. To circumvent these regulations and pursue an IPO on an American stock exchange, Alibaba had to adopt a complicated ownership structure known as a “Variable Interest Entity” (VIE). Through this structure, foreign shareholders do not buy into Alibaba, but rather buy into Alibaba Holdings, an offshore “holding company” that is registered in the Cayman Islands. Shareholders get a stake in the holding company and in Alibaba’s profits, but ultimately do not own shares in Alibaba and have no say in how the company is run. (more…)

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Cyberbullying: Should Parents be Held Liable?

Posted in Case Comment, Litigation, Privacy by LTA-Editor on October 22, 2014

shutterstock_89683588By Farah Ali

In May 2011, Dustin Athearn and Melissa Snodgrass, seventh graders at Palmer Middle School in Georgia, created a fake Facebook page to taunt another student, Alexandria Boston (Alex). The students set up the fake Facebook profile under Alex’s name and used a “fat face” application to create and post an unflattering picture of her. The fake account also stated that Alex was a homosexual and that she endorsed racist viewpoints. To create further damage, the fake persona connected to over 70 Facebook friends, and it sent friend requests to Alex’s classmates, teachers, and family members. Dustin and Melissa used the profile to post graphically sexual, racist and offensive material. This included insinuating that Alex had mental health disorders and took illegal drugs.

When the school found out, Principal Cathy Wentworth called Dustin and Melissa to her office and had them sign a written statement explaining their involvement. Wentworth sent a form to the students’ parents explaining that the students would be disciplined with a two-day in-school suspension for their harassment of Alex. Dustin’s parents grounded him for a week. However, it was not until 11 months later in April 2012 that the profile was taken offline. In fact, the fake profile continued to send and accept new friend requests and users could still view and post on the profile before Facebook finally deactivated the account. (more…)

Washington State Starts a Battle With Patent Trolls

Posted in Case Comment, Government and Regulation by LTA-Editor on October 20, 2014

Screen Shot 2014-10-20 at 3.43.28 PMBy Robin Hammond

Can a state use consumer protection laws to punish patent trolls?

The Washington State Senate Law and Justice Committee is considering penalizing patent trolling. The committee recently discussed a proposed ‘patent troll prevention act’ in a work session on October 2, 2014. The bill in its current form would create a new consumer protection law to fine patent infringement in bad faith. Violators could face a fine of up to $25,000.

The bill outlines a number of factors that a court may consider in determining whether an assertion of patent infringement has been made in bad faith. For example, bad faith may be shown when a person asserting the claim: should have known the assertion was meritless, provides inadequate information in the initial demand letter, or fails to provide basic patent information on request. A court may also consider the reasonableness of the asserting party’s diligence in comparing the ‘infringing’ activity and the patent, and the reasonableness of proposed licensing fees or timeframes. The bill also lists factors which indicate good faith, including diligence, timeliness, and reasonableness. It also names three types of patent holders that are presumed to act in good faith: an investor in the patent, an original assignee, or a university. (more…)

BYOD: Bring Your Own Devices or Bring Your Own Disasters?

Posted in Privacy by LTA-Editor on October 17, 2014

Screen Shot 2014-10-17 at 5.00.50 PMBy Denise Kim

What happens when personal phones are no longer for personal use? Gone are the days where we were issued separate business phones. We have entered into a new era where personal devices are used for work and work devices are used for personal use.

Bring Your Own Device (BYOD) is widely adopted to refer to employees who bring their own computing devices to the workplace for use and connectivity on the secure corporate network. It refers to an increasing trend of employees using personal devices in the workplace or for work purposes. BYOD policies have become an increasing trend in the workforce with more than 50% of midmarket organizations supporting BYOD as a way to boost productivity and reduce costs with the highest percentage of support coming from the legal sector. BYOD policies have the benefit of saving costs and increasing productivity since users have more sharing capabilities. Such sharing capabilities give employees more ability and freedom to share information on mobile devices. (more…)

Liking and Sharing Your Health Information: Privacy Concerns Raised Amidst Rumors of “Facebook Healthcare”

Posted in Privacy by LTA-Editor on October 16, 2014

Screen Shot 2014-10-16 at 7.04.19 AMBy Alex Boguniewicz

Every day millions of people share their interests, photos, and locations on Facebook. So why not share how you are feeling—medically that is. At least that seems to be the idea behind Facebook’s rumored plans to provide a platform for healthcare services. This month, anonymous employees of the social networking company leaked information that Facebook is planning to develop health applications, allowing users to make healthy lifestyle choices and connect with “support communities.” As part of this program, users would have to disclose private health information to Facebook. We have previously examined Facebook’s policy of forwarding user information to online advertisers and its alleged violations of European Union’s privacy laws. Due to Facebook’s history of privacy issues, this potential health program has raised the concern of some attorneys, especially given the extremely sensitive nature of private health information.

The rumored program would involve users sharing certain health information with Facebook, which would then be used to connect the users to a “support community” of other users suffering from the same illness or condition. The idea is similar to other websites dedicated to putting people in touch with each other to openly discuss their health struggles. It is also likely spurred on by the recent success of Facebook’s organ donor program. The organ donor program directs users on how to become organ donors in their state and then allows them to share their registration on their profiles. The initiative was a huge success, with hundreds of thousands of users registering to be organ donors within days of its launch. (more…)

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SEC Clarifies the Parameters for the Use of Crowdfunding in Connection with Social Media

Posted in University of Washington School of Law by LTA-Editor on October 13, 2014

Screen Shot 2014-10-13 at 3.13.42 PMBy Eric Siebert

News of successful crowdfunding efforts are present everywhere we look these days. From ideas of sock monkeys for cancer patients to ideas for dry composting toilets, crowdfunding has given everyday individuals who lack access to a large pot of financial resources the ability to make their otherwise lofty ideas become a reality. Crowdfunding has been described by the SEC as “an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music.” Although crowdfunding is not typically seen as a method for selling securities (due to the plethora of SEC regulations surrounding such sales), Title III of the JOBS Act creates an exemption to normal securities rules, allowing small businesses to more easily sell securities via crowdfunding. This exemption exists for small business as long as they comply with certain regulations.

Prior to the JOBS Act, the SEC restricted sales of securities to only accredited investors and a limited number of non-accredited investors. The majority of the population does not meet the high net worth or income standards to be qualified as an accredited investor, and thus cannot easily purchase a company’s securities. Under Section 5 of the Securities Act, businesses either had to comply with such requirements or face stiff penalties from the SEC.

However, pursuant to the JOBS Act, signed into law in April 2012, small U.S. business startups and entrepreneurs can sell securities to unaccredited investors (i.e., the general public) without having to deal with many burdensome SEC requirements. This crowdfunding exception is codified in Section 4(a)(6) of the Securities Act. This section allows a company (an “issuer” under the language of the Securities Act) to use the crowdfunding exception if, among other things, the company sells no more than $1 million in securities in any 12-month period and no more than a certain amount to any single investor. (more…)

Real Names and Fake Likes: The Struggle to Keep Facebook Interactions “Authentic”

Posted in University of Washington School of Law by LTA-Editor on October 10, 2014

Screen Shot 2014-10-10 at 10.05.56 AMBy Brennen Johnson

Facebook’s recent attempts to prevent fraudulent activity on its platform have drawn both heat and praise. Last week, Facebook issued a statement regarding its continued commitment to combat the proliferation of spammers selling fake “likes.” Facebook explained that businesses can harm themselves through the use of such services because they “could end up doing less business on Facebook if the people they’re connected to aren’t real.”

While the company’s stated intent to cut down on this form of spam has garnered positive response from users, other practices aimed at protecting the authenticity of interactions have come under severe criticism. For instance, last week Facebook officially apologized to the outspoken protestors, Sister Roma and Lil Miss Hot Mess, for its practice of flagging and freezing profiles made under drag queen pseudonyms. Facebook’s product chief issued the apology, stating that hundreds of drag queens who were flagged for violating Facebook’s real-name policy will be able to use their stage names on Facebook. The same practice of requiring the “real names” of users has drawn similar criticism in the context of domestic violence victims and political dissidents living within authoritarian political regimes. (more…)

Cell Phone Malware

Posted in University of Washington School of Law by LTA-Editor on October 8, 2014

Screen Shot 2014-10-08 at 2.34.08 PMBy Doug Logan

“But my cell phone can’t get a virus, right?” Wrong. The rise in smart-phone popularity and the “app” market have provided new avenues for unsavory people to try to attack your personal information.

“Cell phone Malware” comes in three main varieties: worms, trojans, and spyware, all of which can lead to system collapse, loss of information, and information leakage. Worms are typically transmitted via text or SMS messaging. Their primary goal is to endlessly reproduce, and worms do not require user interaction to execute. Trojans do require user interaction and can be much more dangerous because they typically transport information to a third party server. Trojans get their name because this type of malware is typically “hidden” in an application that is attractive to the user. Spyware, a broader category of malware, refers to any kind of malware that tracks and distributes a user’s information to third parties. All three of these viruses can be frustrating and potentially costly to the user.

One common source of cell phone malware is internet advertisements known as malvertisements. While impossible to keep completely secure on the internet, McAfee recommends users “[p]erform web searches on trusted search engines such as Google, Yahoo or Bing to ensure higher safety measures in your search results.” Further, McAfee suggests to “[d]ouble check the URL of any page you are visiting, especially when led there by an untrusted ad,” and to “[b]e wary of clicking on any ad that promises free product or prizes for almost no effort on your part.” (more…)

Transportation Startups: Online Marketplace or Retailer?

Posted in Government and Regulation, Technology by LTA-Editor on October 7, 2014

Screen Shot 2014-10-07 at 2.43.03 PMBy Lydia Ansari

Sidecar, Lyft, Uber and other transportation network companies (TNCs) have been thriving in a marketplace generally free from government regulation. But this freedom may be short lived. State legislators in Colorado, California and Washington are catching-up with technology innovations in the transportation industry by proposing and enacting state-level regulations.

This push for legislation comes in response to a growing concern over passenger safety and claims that transportation network companies have inadequate insurance policies. In one instance, an Uber car driver allegedly attacked a passenger with a hammer during a late night ride, leaving the passenger hospitalized with a fractured skull and in danger of losing his left eye. The attack occurred after a disagreement over the route, and the passenger is suing Uber.

Uber strongly disclaims any liability in their terms of service, which states that people ride at their own risk when they jump into a car with “third party transportation providers.” Ride-share companies have consistently claimed protection under section 230 of the Communications Decency Act, which grants broad immunity to websites with user-generated content. TNCs argue that as platform providers that connect drivers and riders, they should not be liable for torts committed by third party drivers. However, this position may fall apart under closer inspection. (more…)

Corvette’s New Valet Mode Implicates Occupant Privacy Concerns

Posted in University of Washington School of Law by LTA-Editor on October 6, 2014
© General Motors

© General Motors

By Amanda Brings

Owners of the 2015 Chevrolet Corvette beware: it may be illegal to activate the vehicle’s Valet Mode in certain states. The Corvette’s Valet Mode, an industry-first, has been advertised by GM as a “baby monitor for your baby” and a way for owners to monitor “valets behaving badly.” When activated, Valet Mode disables the car’s infotainment system, records live video, and locks the storage compartments. The system’s legality has been brought into question, however, because of its ability to capture in-car audio along with video. Indeed a number of states, including Washington, have privacy or wiretapping laws that require the consent of all parties to an audio recording. Other states with this requirement include California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, and Pennsylvania. Thus, owners who use the feature to record unsuspecting valet drivers in one of these states could potentially be in violation of the law.

Washington’s Privacy Act, RCW 9.73.030, forbids public or private persons or entities from intercepting or recording any “[p]rivate communication transmitted by telephone . . . or other device . . . without first obtaining the consent of all parties in the communication.” Under the Privacy Act, consent is considered to be obtained whenever one party has announced to all other parties engaged in the communication “in any reasonably effective manner” that the communication is about to be recorded. Although the Privacy Act doesn’t define a private communication, in State v. Modica, 164 Wn.2d 83 (2008), the Washington Supreme Court held that a communication is private (1) when parties manifest a subjective intention that it be private, and (2) where that expectation of privacy is reasonable. (more…)

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