Rimon Law Blog
Obama Administration Approves $1.5 Billion in Foreclosure-Prevention Funding
On June 23, the Obama Administration approved $1.5 billion in "Hardest Hit Fund" foreclosure-prevention funding for state Housing Financing Agencies. The funding is meant to support struggling homeowners in Arizona, California, Florida, Michigan, and Nevada.
President Obama established the "Hardest Hit Fund" in February 2010 in order to provide aid to those most affected by the housing downturn. This recent approval will assist struggling homeowners with negative equity through principal reduction, assist some individuals with mortgage payments, facilitate the settlement of second liens, facilitate short sales and/or deeds-in-lieu of foreclosure, and assist in the payment of arrearages.
The full press release from the Department of the Treasury is available here.
Supreme Court Upholds Employer’s Right to Read Employee Text Messages
The Supreme Court recently held in City of Ontario v. Quon that in certain circumstances an employer has the right to read text messages sent from and delivered to a pager issued by the employer to one of its employees. While reading employee text messages may generally violate the Fourth Amendment's guarantee against "unreasonable searches and seizures," the Court held in this case that since the employer conducted its review for a noninvestigatory, work-related purpose, it was withing its rights.
The source of the litigation arose in 2001 when the City of Ontario, CA, issued pagers to its employees, among them Jeff Quon who was working for the Ontario Police Department. Under the wireless service plan, monthly text allowances were limited and excess usage was charged. Quon was told by his supervisor that his text messages would not be monitored as long as Quon paid the overage fees. However, before acquiring his pager, Quon and others accepted the City's "Computer Usage, Internet and E-Mail Policy" under which the City "reserve[d] the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources." Although texts were not explicitly included in this policy, the City made clear that texts would be treated the same as e-mails. When Quon and other officers incurred overage charges numerous times, it was proposed that perhaps the text allowance was too low and that the department should determine whether the excessive texting was work-related, and if so, to expand the monthly text allowances. In fact, the vast majority of Quon's texts sent and received while at work were not work related, and he was disciplined. However, Quon and others felt the review had violated their Fourth Amendment rights and filed this action. The Court upheld the City's right to review the texts.
This opinion is an important reminder to employers to ensure that their personnel policies convey a clear message to employees regarding privacy issues related to use of company communication systems. Also, employers should make sure that their managers are aware of company policy and are not making misrepresentations to employees.
House Passes Changes to Carried Interest Taxation
On May 28th, the House passed H.R. 4213, the "American Jobs and Closing Tax Loopholes Act." The Act addresses an array of issues, but has particular signficance for certain partnership and LLC "carried interests" for investment fund managers. If it goes through, the Act would prevent investment fund managers of venture capital, private equity, hedge and real estate funds from paying taxes at capital gain rates on investment management services income received as carried interest in an investment fund.
Under the proposed changes, return on invested capital in the form of carried interest would continue to be taxed at capital gain tax rates. But to the extent that carried interest does not reflect a return on invested capital, investment fund managers would eventually be required to treat seventy-five percent of the remaining carried interest as ordinary income.
The proposed changes would not take effect until 2011. However, for the bill to become effective it must also be passed by the Senate, an outcome which is not certain to occur.
Class Action For 1.5 Million Wal-Mart Employees Affirmed By Ninth Circuit
In the recently decided case of Dukes v. Wal-Mart Stores, the Ninth Circuit upheld a 2004 district court's decision to certify a class that could potentially consist of 1.5 million women employed by Wal-Mart since 1997. Through this gender discrimination class action, the employees seek back pay, declaratory relief, and injunctive relief.
The plaintiffs allege that Wal-Mart engaged in discriminatory pay and promotion practices in violation of Title VII by paying female employees less than their male counterparts and giving fewer promotions to women than to men.
In 2005, after the district court held that class certification was appropriate under Federal Rule of Civil Procedure 23, Wal-Mart appealed that decision claiming that the class did not satisfy Rule 23(a)'s class requirements and that the potential size and cost of the claim violated Rule 23(b)(2). While the Ninth Circuit did not comment on the merits of the case, it held that there was no violation of Rule 23 that would prevent the class action. Wal-Mart plans to appeal the case to the Supreme Court.
The Ninth Circuit also held that when a district court is determining class status under Rule 23, it must apply a "rigorous analysis." It will be interesting to see whether this standard benefits parties opposing or advocating class certification in the future.
FINRA Regulatory Notice Regarding Regulation D Offerings
The Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 10-22 on April 20, 2010. The notice, which came in light of recent abuses in Regulation D offerings, was intended to be a reminder to broker-dealers of their obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings made under the Security and Exchange Commission's Regulation D under the Securities Act of 1933 (also known as private placements).
This obligation arises from the broker-dealer's "special relationship" to the customer and the representation, in recommending the security, that the broker-dealer has conducted a reasonable investigation and is basing the recommendation on conclusions drawn from the investigation.
If such a reasonable investigation is lacking, the broker-dealer must make that fact and the risks that arise from the lack of information known when making a recommendation.
Additionally, broker-dealers recommending securities offered under Regulation D must meet its suitability requirement under NASD Rule 2310, and must comply with the advertising and supervisory rules of FINRA and the SEC. That is, a broker-dealer must conduct a suitability analysis when recommending securities to both accredited and non-accredited investors that will take into account the investor's knowledge and experience.
While the notice admits that no list of reasonable investigation practices would suffice since each investigation must be tailored to the specific facts of the Regulation D offering in question, it does provide a list of sample investigative practices. A few of those include:
- Examining the issuer's governing documents, noting particularly the amount of its authorized stock and any restriction on its activities.
- Looking for any trends indicated by the financial statements.
- Inquiring about internal audit controls of the issuer.
- Contacting customers and suppliers regarding their dealing with the issuer.
The full notice is available at FINRA.org.
Ninth Circuit Broadens Definition of “Copyright Registration” for Litigation Purposes
In order to initiate an infringement action in federal court, the Copyright Act requires the litigating party to hold a copyright registration. While the circuits are split on what constitutes a copyright registration, the Ninth Circuit recently joined the Fifth and Seventh Circuits in Cosmetic Ideas v. IAC in holding that anapplication for copyright registration suffices for a registration for litigation purposes.
In this case, Cosmetic Ideas developed, manufactured, and sold a unique piece of costume jewelry starting in 1999. Sometime thereafter, another company, HSN, started manufacturing and distributing a "virtually identical" piece of jewelry. Cosmetic applied for copyright registration of its jewelry on March 6, 2008 and received confirmation from the Copyright Office of receipt of the application on March 12. Cosmetic filed its infringement action on March 27, before the Copyright Office had issued a registration certificate for the jewelry (which it subsequently did). Despite that fact, the Ninth Circuit held that the application sufficed for the purposes of initiating an action in court.
This decision by the Ninth Circuit is beneficial to plaintiffs who can now proceed with infringement actions without worrying about their cases being dismissed or impeded for lack of subject-matter jurisdiction if they have not yet been granted a copyright registration from the Copyright Office.
New Employee Rights Poster Issued Under National Labor Relations Act
The Department of Labor recently published a poster listing employees'; rights under the National Relations Labor Act (NRLA). The notice, which Federal contractors and subcontractors are required to display in a conspicuous location, informs employees that under the NRLA they are guaranteed:
- the right to organize and bargain collectively with their employers;
- the right to engage in other protected concerted activity; and
- protection from certain types of employer and union misconduct.
The notice is required to be posted all places where notices to employees are normally displayed, whether physical or electronic. It is available in both a one-page 11 x 17 in. format and a two-page 8.5 x 11 in. format. There is a fact sheet provided which lists, among other things, exceptions to the posting requirements and information on posting the notices and acquiring translated posters. More information is available at the Office of Labor-Management Standards website.
Protecting Children Online–Where we are and where we’re heading under Children’s Online Privacy Act
Originally posted on: The Internet Law Advisor Blog
Background: The Children’s Online Privacy Protection Act of 1998 (COPPA) with its implementing regulations, the Children’s Online Privacy Protection Rule (COPPA Rule) (in effect since April 21, 2000), have served as the primary law in the U.S. for protecting personal information about children online. It’s a gross understatement to state that the Internet is a different world than what it was when COPPA and the COPPA Rule were implemented. Suffice it to say that the world of social networks combined with mobile computing has, for better or for worse, become the fabric of our children’s world – and in 1998 social networks were not even in Congress’s imagination. The Federal Trade Commission (FTC), charged with enforcement of COPPA has scheduled a COPPA Rule Review Roundtable on June 2, 2010 and is collecting comments through June with the objective of seeing whether changes to the COPPA Rule should be considered. On April 29th, Senate Commerce Chairman John (Jay) Rockefeller, D-W.Va., said that Congress may also need to consider making changes to COPPA itself. So, it’s a good time to review what COPPA requires and what might be changed.
First – A Word of Caution: COPPA enforcement is alive and well. Late last year Iconix Brand Group, Inc. agreed to pay a $250,000 civil penalty to settle FTC charges that Iconix violated COPPA by knowingly collecting, using, or disclosing personal information from children online without first obtaining their parents’ permission. The FTC order also contains standard compliance, reporting, and record-keeping provisions to help ensure that Iconix abides by its terms. Often the internal costs of complying with FTC ordered monitoring and reporting obligations can exceed the amount of the fine. Nobody wants to be caught in the FTC’s cross hairs.
Summary of COPPA:
The COPPA Rule has broader coverage than commonly thought. It applies to: (1) websites directed to children under 13 that collect personal information from children; (2) general audience websites that knowingly collect personal information from children under 13; and (3) general audience websites that have a separate children’s area and that collect personal information from children. It is important to emphasize that COPPA only applies to children under 13. No protection is extended to children 13 and above. Whether this age cut off leaves many vulnerable children still vulnerable can be debated, but does not seem to be seriously on the table for reconsideration.
Covered websites are required to: (1) post a privacy policy on the homepage of the website and link to the privacy policy everywhere personal information is collected; (2) provide notice to parents about the website’s information collection practices and, with some exceptions, get verifiable parental consent before collecting personal information from children; (3) give parents the choice to consent to the collection and use of a child’s personal information for internal use by the website, and give them the chance to choose not to have that personal information disclosed to third parties; (4) provide parents with access to their child’s information, and the opportunity to delete the information and opt out of the future collection or use of the information; (5) not condition a child’s participation in an activity on the disclosure of more personal information than is reasonably necessary for the activity; and (6) maintain the confidentiality, security and integrity of the personal information collected from children.
The most challenging parts of the COPPA Rule to comply with are the requirement to get parental consent before collecting a children’s information and the procedures for allowing a parent to review the child’s personal information, have it deleted, and refuse to allow the further collection or use of the child’s information. Privacy policies and the entire operation of covered websites must be carefully reviewed for compliance with the COPPA Rule.
For instance, how is parental consent verified? Under a 2005 Amendment to the COPPA Rule, a sliding scale mechanism was confirmed so that lower risk usage of information is subject to a lower level verification process and higher risk usage is subject to a higher level of verification. If a website collects information for its own internal use (i.e., lower risk level), then an email message to the parent, combined with additional verification steps (such as sending a delayed confirmatory email message to the parent after the original consent is received, or confirming consent via the telephone or standard mail) will be sufficient. However, where information will be disclosed to the public or to a third party (i.e., higher risk level), then higher levels of initial verification are required, such as confirmation via a signed consent form returned to the website operator, requiring the parent to use a credit card during the confirmation process, requiring the parent to call a toll-free number, among other methods listed in the Amendment.
The COPPA Rule also provides that a website’s compliance with FTC-approved self-regulatory guidelines serves as a safe harbor in any enforcement action for violations of the COPPA Rule. Several organizations have been approved by the FTC for verifying compliance to qualify for the safe harbor.
What Changes Will Likely Be Considered?: The primary issues that will be considered will involve the impact of social networks, mobile computing, interactive television and interactive gaming on the collection of personal information from children. Additionally, the “below 13” threshold might also be reconsidered in light of state law changes (like in Maine – which however subsequently repealed their new privacy law).
The whole process for verifying age is also one that might be considered. Today the primary method is by asking the user to put in a birth date. However, it does not take much sophistication for a child to realize the purpose of this data field and insert a date indicating that they are at least 13. For instance, Facebook does not allow members less than 13 years of age. However, don’t most kids know this and know how to get around it? Facebook’s Director of Public Policy, Tim Sparapani acknowledges that it is currently impossible to verify someone’s age online, but claims that Facebook has safeguards in place aimed to block children under 13 from joining. He also does not believe that Congress should get involved by amending COPPA – because this would “discourage innovative ideas aimed at enhancing teen and children safety” and might actually “undue many of our innovative privacy and safety tools.” Hmmm – probably not a disinterested perspective I would say!
Other items that might be considered:
* Use of automated systems that filter out personally identifiable information prior to posting for children’s website submissions.
* Whether the COPPA Rule’s definition of “personal information” should be expanded to include items such as persistent IP addresses, mobile geolocation data, or information collected in connection with behavioral advertising.
* Whether the COPPA Rule’s process for FTC approval of self-regulatory guidelines – known as safe harbor programs – has enhanced compliance, and whether the criteria for FTC approval and oversight of the guidelines should be modified in any way.
Bottomline: Websites that are subject to COPPA should be thoroughly reviewed prior to launch. Additionally, since changes to these websites may occur frequently, periodic reviews should be performed as well to verify ongoing compliance.
Is It a Barbie World?
We all can agree that Barbie is a famous brand, regardless of what we may think of her or the thin values she espouses. Barbie dolls have been around since May 9, 1958. The first Barbie trademark registration (Reg. No. 0,689,055) for a “doll” was issued on December 1, 1959.
This is interesting because “doll” in the singular form is no longer allowed to be used in the listing of goods and services in trademark applications. Rather, applicants must state “dolls” in the plural because using a mark in only one transaction is not enough for trademark rights to attach. In other words, you must sell multiple items (even if the items are identical dolls) for trademark rights to attach.
OK, back to Barbie.
In 1997, Aqua produced the song Barbie Girl on its album Aquarium. The song, somewhat surprisingly, made it into the Top 40. The Chorus goes like this –
“Barbie Girl”
I’m a barbie girl, in the barbie world
Life in plastic, it’s fantastic!
you can brush my hair, undress me everywhere
Imagination, life is your creation
Come on Barbie, let’s go party!
* * *
Come on Barbie, let’s go party!
(Ah-ah-ah-yeah)
Come on Barbie, let’s go party!
(uu-oooh-u)
Come on Barbie, let’s go party!
(Ah-ah-ah-yeah)
Come on Barbie, let’s go party!
(uu-oooh-u)
* * *
In September, 1997, Mattel brought a trademark infringement lawsuit against the music companies who produced, marketed and sold the Barbie Girl song, including the band Aqua and its record label, MCA Records. In July, 2002, the 9th Circuit upheld the District Court’s ruling in favor of Defendants, finding use of the Barbie mark in the Barbie Girl song to be a nominative fair use and a parody. The court found that “the song pokes fun at Barbie and the values that Aqua contends she represents.” The case was publicly contentious, which led Judge Kozinzki to end with the best final sentence ever written in a judicial opinion, “The parties are advised to chill.”
In an ironic twist, Mattel apparently recently licensed Aqua’s song. It re-wrote the lyrics and released the song this year as its The Barbie® Official Music Video 2009. The video is part of a promotion to celebrate Mattel’s October 2009 release of new poseable Barbie dolls. The video is intended to teach you how to “Do The Barbie” dance. Look out country fans — the Barbie is soon to take over line dances everywhere! I wonder who owns the copyright on that choreography The next line of Barbie lawsuits awaits.
How did I find myself Blogging about Barbie on a Friday night It started this morning with the e-mail digest from the VERB LinkedIn Group asking for guesses on which song has the most brand mentions. Not knowing that the question really meant how many different brands were mentioned in a single song, I guessed Barbie Girl, which repeats Barbie over and over and over and over and over . . .
After posting to LinkedIn, I read the linked article and learned that the question originated with one of my favorite blogs, DuetsBlog, as the culmination to an entertaining blog about brands in songs.
Open Brands?!?
A few weeks ago, I attended the Social Media for Sustainability conference hosted by Justmeans. I met Joey and Stacie Shepp there and Joey told me about their project, Open Brands. Open Brands uses Twitter to follow and measure the real life conversations that consumers are having about brands. Open Brands is able to do this through the use of “brand tags” on Twitter. Brand tags are hashtags about brands. Hashtags consistof use of the # hash symbol — #love — & a word. Simply put, brand tags are hashtags used with brands — #Patagonia.
Brands symbolize the relationships consumers have with companies and their products and services. Now, Open Brands is providing a way to watch and track that relationship. By monitoring these Brand Channels, as Open Brands calls them, Savvy brand owners will work with this information to maintain and improve the relationship they have with their customers in real time.Pretty cool!