MediaTech Law

By MIRSKY & COMPANY, PLLC

Startups: Capital Fundraising, Crowdsourcing and Securities Law

“With regulators considering easing fund-raising rules for start-ups …” a recent Wall Street Journal story began, “social-networking sites that link entrepreneurs to large pools of donors are gearing up for a boom.”

First, the background.  Federal and state securities laws govern the sales – including the solicitation of sales – of securities, affecting all efforts to raise capital for startups.  This includes any public efforts to raise money, and includes raising small or large amounts of money.  Generally, sales and solicitations of sales of stock require compliance with SEC and various state securities law, and more particularly the registration requirements of those laws.

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BitTorrent Copyright Infringement: Trouble for DMCA?

BitTorrent has been in the (copyright) news lately – and not surprisingly – after the movie studios set their sites on bringing down yet the latest iteration of file-sharing technology.

2 great background sources on what BitTorrent is and how it works can be found here and here.  In short terms, BitTorrent is a file sharing technology, different from Napster and its peer-to-peer progeny in that it draws down pieces of large data files from multiple computers – rather than single computer to single computer peer-to-peer – based on a “community” structure of participating individual users.  The two biggest distinctions are (1) no single source for the compiled total file contributes more than a very small portion of the total file and (2) the distributive structure finesses the constant file-sharing problem of large data transfers demanding large broadband resources.

Why is bitTorrent in the (copyright) news?

BitTorrent is in the news not simply because Netflix’ CEO stated that “we’ve finally beaten bitTorrent.”  (“We”, by the way, presumably refers to Netflix’ full-file streaming capabilities.)

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App and Software Ownership – Misidentification of Value

You go into a conversation from a lawyer’s perspective, expecting the discussion to be all about “ownership, ownership and ownership”.  You might expect app and other software developers to focus on nothing other than ownership.

Many times you’d be wrong.  One problem with ownership: Misidentification of value.

As Dan Berger of Social Tables pointed out, many technology companies aren’t strictly “technology” plays at all, and their value isn’t in their code, but rather in their execution or implementation.

I recently spoke with Eric Gunderson of Development Seed, whose open-source mapping technologies illustrate the same principle of technology execution: In the case of Development Seed’s MapBox, the great strength is speed.  Big data use means great mapping potential, but also means big processing problems.  Big processing problems reward innovative design execution.  If speed of mapping capability and management of data is a priority, ownership is less of a concern than execution and capabilities.  This is true even with proprietary products rather than services.  One might of course say, “Use our system, use our product,” but why should we use it?  The answer is that you do something better than everyone else out there using comparable – and perhaps even identical – technologies.  You wrap it up and package it – and execute it – better and faster.

The coding is valuable, but the greater value is in the execution of the coding and coupling of the organic coding with acquired knowledge from third-party applications and libraries, including (for example) Javascript libraries and other open-source software under GPL, MIT or other licenses.

The code itself may, or may not be open-source, but the value often is in the packaging, in the delivery, in the execution and the support.  In reality, I – the end user – cannot do much with the code itself beyond the immediate and narrow need of my specific use, and that will be without support, without updates, modifications, improvements and all the other benefits from open-source collaboration.  From the developer’s standpoint, the ability to develop products that continue to feed a renewable support business drives further continued product development.

Whether or not open-source, Social Tables, like MapBox, can benefit from copyright protection as a “collective work” or compilation, and that protection has meaningful value.  But as Dan Berger of Social Tables is quick to recognize, the copyright protection has less meaning to his potential market than the elegance of his design and the ease-of-use of his execution.   As technologist Piotr Steininger told me recently, referring to SproutCore, with increasing use of open-source, developers – and technology businesses – have realized that “the framework has potential but it can only benefit from open collaboration.  So in a sense the company gives up a product but in return gains a better product by sharing it.”

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Podcast #9: App Development Legal Issues: Open Source, Copyright, API Terms of Use and More


Today, we will discuss the business and, particularly, the legal landscape faced by application (App) developers dealing with mobile platforms (iOS, Android and Blackberry being dominant), including dealing with application interfaces (APIs) when developing based on existing applications, and, of course, client relationships.

I am joined today by Liz Steininger, co-founder of Tapangi Consulting and project manager in the DC Government’s Office of the Chief Technology Officer.  Tapangi Consulting specializes in mobile and HTML5 application development as well as content management.  Liz is also an active member of the DC Tech community and you can find her on Twitter as @liz315.

Some of the issues we discuss today are these:

  • Protecting ideas in early stages of pitching to potential clients.
  • Application developer agreements and API Terms of Use (TOUs).
  • Platform question: As a developer, how do you think about development based on different platform (e.g. Android or iOS or Blackberry) or a specific API?
  • Copyright and “open source” issues, GPL, libraries, use of third-party code.
  • Ownership and Rights Issues
  • Privacy and uses of personal information (PI).

Please click here for the podcast.

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Startup Companies: LLCs vs. S corps, Startup Capital vs. Outside Investors

Startup Structure Question: Why and when are LLCs preferable to S corps and vice versa?

Answer #1: If now or soon contemplating employee stock options and/or bringing in outside investors, then corporation status is probably desirable.  And … you can later convert from S to C.

Answer #2: Otherwise, LLCs are more desirable.

Pass-Through Entities

Both S corps and LLCs are pass-through entities, meaning that income will not be taxable at the company level, but only taxable to the owners.  This distinguishes these 2 entity types from traditional “C” corporations, which must pay taxes both at the company level and later when distributed to the shareholders.

Tax Advantage – S Corps

S corps have one – potential – further tax advantage over LLCs, in the ability to effectively reduce an owner’s self-employment taxes by paying the owner a salary versus dividends.  So, for example, assuming two companies, one an S corp, the other an LLC, both earn $100,000 in income.  The S corp could pay the owner $50,000 in salary, and the $50,000 balance would be deemed dividend income to the owners or owners, and not subject to self-employment taxes.  The salary portion is subject to self-employment taxes, while the dividend portion is not.

Using the same figures for an LLC, the full $100,000 would be deemed income to the owner subject to self-employment tax.

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App Developer Legal Issues: API TOUs, Copyright and Trademark

Our Twitter chat last week with technology and entertainment lawyer Joy Butler highlighted legal issues with app development, including contract issues between app developers and clients, on one end, and intellectual property (IP) and API issues between the app and the intended development platform, on the other end.

Privacy issues become pressing later when the app goes public for end users, although the biggest privacy problems tend to arise when app publishers get tripped up by commitments made in their own end user license agreements (EULAs) or privacy policies, more so than from any violations of privacy laws.  More on privacy and the app/API problems in a separate blog post.

Immediate issues are copyright and trademark, both governed by federal laws, but also governed by API terms of use and similar application development agreements with hosting platforms.  Apple’s software developer kits (SDK) for the iPad and iPhone encompass similar purposes as part of broader packages of developer protocols for use of those APIs.

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Podcast #8: “Street Art”: Fair Use of Prior Copyrights?

In today’s podcast, we discuss “street art”, which evidently isn’t just your grandfather’s graffiti anymore!  Street art has lately been in the news particularly because of several prominent copyright infringement cases, and most notably fallout from Shepard Fairey’s 2008 Obama “Hope” posters.  An even more recent controversy came out of the Oscar-nominated documentary film by Banksy, “Exit Through the Gift Shop”.

Along the way, we will touch on Run DMC, Thierry Guetta (aka “Mr. Brainwash”), “pop-art”, photography, Andy Warhol and Robert Rauschenberg.

Joining me to discuss copyright, fair use, street art, what is street art and all that we can cover in 15 minutes … I’m joined by Brooke Jimenez.  Brooke is a second-year law student at Georgetown University Law Center with a focus on international law, and a creative mind on issues of media law.

Stories mentioned in the podcast include this from The Art Newspaper, and this from George Will in the Washington Post.  Please click the audio player link below for the podcast. Enjoy.

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Twitter Chat: App Development/API Legal Issues with Andrew Mirsky and Joy Butler

The following is our first twitter chat on trending legal issues. This one focused on legal issues involved with app development and APIs and featured thoughts from attorneys Andrew Mirsky and Joy Butler (@joybutler). Be sure to stay tuned to the @MirskyLegal twitter account for more information on the next #lawchat and please tweet in using the provided unique hashtag!

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Twitter Chat Tues 4/5 12:15pm – Twitter Chat – App Development/API Legal Issues, Live from PJ Clarke’s

Please join me (@mirskylegal) and fellow DC media law attorney Joy Butler (@joybutler) for a Twitter chat (hashtag: #lawchat1) discussing App Development/API legal issues, Tues 4/5, 1215pm, live @ PJ Clarke’s, 1600 K Street, NW, WDC (downstairs Sidecar restaurant).  Limit 8 seats in person, please RSVP to andy@mediatechlaw.mstreetlegal.com. Join us in person, or join the discussion via twitter hashtag #lawchat1.

Possible topics:

  • Compliance with third party requirements (Facebook, Twitter, Google) for use of APIs
  • Permissible access to and use of customer data
  • Use of open source code for development of software
  • Development contract issues, including:
    • copyright ownership (“work for hire” or partial license? To what extent can developer use functionality/code on work for subsequent clients?)
    • warranties, reps, indemnification
    • importance of defining scope of work (work often done in phases)
    • developer’s duty to fix bugs and provide maintenance after delivery
    • international law/enforcement issues if developer and client are not both US based
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Podcast #7: Privacy vs. 1st Amendment – Supreme Court case of IMS Health v. Sorrell

 

In January, the Supreme Court agreed to hear arguments in the case of IMS Health v. Sorrell, an appeal of a ruling in November in favor of data aggregator IMS Health by the U.S. Court of Appeals for the 2nd Circuit. The case involves a 2007 Vermont statute, similar to laws in many other states, that prohibits the use, sale and transfer of prescriber-identifiable data (referred to as “PI Data”) for marketing purposes, unless a prescriber (meaning: a physician) opts in to allow use of his or her PI Data. The State of Vermont and its supporters argue that any 1st Amendment challenges to the law by users of the PI Data are sufficiently overcome by substantial privacy interests of doctors and their patients.

To discuss these issues, my guest today is John Verdi, Senior Counsel of the Electronic Privacy Information Center (EPIC).  John and EPIC have filed an amicus brief in the Supreme Court in support of Vermont’s position, and I’ve asked John to join me today to briefly discuss the privacy issues involved.

Please click the link below for the podcast.

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Copying of Entire Article a Fair Use? Maybe. Sort of. Not Normally.

The Las Vegas copyright fair use loss for Righthaven last week was probably less meaningful – and less amusing – than the “money quote” (as Wall Street Journal blogger Ashby Jones put it) from the federal Judge James Mahan, who reportedly mused, “I realize this is going to be appealed.  I tell litigators ‘that’s why God created San Francisco’” – site of the 9th Circuit federal appeals court.

At first glance, the case is a breathtaking blow for newspapers and media organizations (including, presumably, bloggers), because it upheld a fair use defense against copyright infringement where the newspaper story was copied in its entirety.

This case would seem to run afoul of every fair use guideline ever published, including the fair use law itself, and particularly the frequent characterization of a “fair” use as a “transformative” use:

… whether the new work “merely supersede[s] the objects” of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “transformative.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994).

But that’s first glance.  Judge Mahan hasn’t yet issued his Order, so we know only wha the Las Vegas Sun reported from the hearing.  

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Do Corporations Have Personal Privacy Rights?

Thanks to Andrew Mirsky for contributing research and feedback to this post.

Does a corporation have the same rights as a person?

It really depends on the context. In the context of personal privacy, the answer is no.

In a unanimous ruling this month, the Supreme Court found that corporations are not entitled to the same “personal privacy” rights as individuals under the Freedom of Information Act (FOIA).

After a 2004 investigation by the Federal Communications Commission (FCC) into AT&T’s billing practices, a trade group including AT&T competitors submitted a FOIA request to the FCC seeking records of the inquiry. The FCC protected some of AT&T’s trade secrets and customers’ personal information, but refused AT&T’s request under the personal-privacy exemption in FOIA to protect certain other information.  The FCC ruled that AT&T’s records should be publicly released under FOIA because the company could not claim “personal privacy.”

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