Addressing legal issues with the latest technological developments and social media trends.
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 A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

 

 

Surprise: Facebook Is The Tech Company That Reports The Blowout Quarter
The social network surprised on the massive upside. Its mobile business is maturing at an even quicker clip than some aggressive estimates.

 

SEC Says Texas Man Operated Bitcoin Ponzi Scheme
Regulators have cracked down on an alleged Ponzi scheme involving the virtual currency bitcoin as they issue a more general warning about the dangers of such scams for investors. 

 

Upcoming Event: How to Comply With Social Media Regulations While Building Deeper Customer Relationships
In this webcast, IBM and Integritie will explore the opportunities that social media channels now give all organisations to build deeper relationships with their customers and how their solution SMC4 meets the strict compliance regulations set by the FCA, FINRA, SEC and NASD. Using social media is something that worries many organizations across all industries, but particularly concerns Financial Services and highlights the communication risks that could potentially occur thus leading to brand and reputation damage, or worse.

 

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In June, Pillsbury welcomed Riaz Karamali to the Corporate & Securities – Technology practice in the firm’s Silicon Valley and San Francisco offices. He has vast experience with start-ups and in the the videogame space is a strong fit with Pillsbury’s capabilities in the San Francisco Bay Area. Mr. Karamali has acted as outside general counsel to many privately-held companies across a range of industries including the video game, cloud computing, mobile, biotechnology, semiconductor and medical device sectors. He frequently represents clients in Europe, Asia, and the Middle East on cross-border transactions.

Riaz is a great addition to the firm’s Social Media & Games team. Pillsbury’s multidisciplinary Social Media & Games team includes over 70 attorneys around the world working at the forefront of emerging business and legal issues relating to Virtual Goods & Currency, Gamification, Gamblification, Mobile Apps and Location Based Services, Augmented Reality, Online & Video Games, Social TV and much more.

The team’s unique capability to provide comprehensive, proactive advice on these cutting-edge issues results, in part, from our attorneys’ commitment to be involved and stay abreast of rapidly evolving business, legal and technical trends. Through this investment, our team obtains valuable knowledge and insights that enable us to provide significant strategic advice and resources to clients, well beyond just “doing legal work.”

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Jim Gatto, and James Chang recently published “Mobile Privacy Practices: Recent California developments indicate what’s to come” in the June issue of Computer Law Review International.

The use of mobile applications has seen huge growth in the past few years. As the use of apps become increasingly commonplace, social concerns such as the privacy of app users will increasingly need addressing. California is taking the lead in regulating this important issue. For more information, including an overview of mobile privacy, a summary of California’s stance on how to address the issue, an overview of the state’s principles regarding privacy, its best tips for complying with its principles, and an examination of the privacy related laws outside of California, please read the full article: Mobile Privacy Practices: Recent California developments indicate what’s to come.

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As recently reported, FINCEN issued significant guidance on legal issues with virtual currency. Shortly thereafter, an enforcement action was initiated against Mt. Gox, one of the largest bitcoin exchanges for operating without the proper licenses.

The use of virtual currency is prevalent and an important part of many social media and games business models. But it is imperative to understand the legal ramifications of its use. For an overview of the FINCEN guidance our team has prepared an Article regarding these issues.

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On May 28, 2013, the New York Advisory Committee on Judicial Ethics issued an opinion stating “that the mere status of being a ‘Facebook friend,’ without more, is an insufficient basis to require recusal.” (Emphasis in original). The sole act of friending an individual on Facebook does not create an appearance of impropriety, nor does it allow the questioning of a judge’s impartiality.

The unknown justice inquired if recusal is necessary in a criminal matter in which he or she is Facebook friends with the parents or guardians of certain minors allegedly affected by the defendant’s conduct. The justice indicated that the parents are mere acquaintances and that he or she can be fair and impartial.

The Committee cited previous opinions finding that there is nothing inherently inappropriate about a judge making use of a social network. Because interpersonal relationships are unique and fact-dependent, judges must ultimately determine the nature of their relationships.

Various judicial advisory committees have weighed in on judges’ use of social media, with each reaching slightly different results.

In 2011, the Oklahoma Judicial Ethics Advisory Panel issued one of the most restrictive opinions, categorically prohibiting social media “friendships” between judges and court staff, law enforcement officers, social workers, attorneys, and others who may appear in the judge’s court.

Several months ago, an opinion by the American Bar Association Standing Committee on Ethics and Professional Responsibility provided judges with a great deal of latitude in their online personas. While judges should disclose information believed to be reasonably relevant to a possible motion for disqualification, the mere fact than an online relationship exists is not automatically grounds for recusal. For example, a judge might disclose a social media connection with a party, lawyer, or witness, but state “that the judge believes the connection has not resulted in a relationshop requiring disqualification.” Judges must take care, however, not to publicly endorse candidates for public office by “liking” online content.

For more information, see:

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Laura Gustafson will present during a one-hour PLI webinar briefing entitled “Catch Phrase or Trademark Infringement? A Trap for the Unwary,” on June 19 at 1:00pm EST.

The recent 2nd Circuit opinion in Kelly-Brown v. Oprah Winfrey, _F3d_, 2013 WL 2360999 (2d Cir 2013) highlights a potential trademark “trap for the unwary” and the need for vigilant clearance. Companies regularly make use of catch phrases and other short phrases, terms, and images in connection with advertising their primary brands. Often such phrases are merely intended to catch the attention of consumers, and are not intended to function as company trademarks or slogans. The Oprah case is a good reminder, however, that even seemingly tertiary and incidental phrases should be evaluated and properly cleared.

Topics to be discussed include:

  • A detailed analysis of the district court and 2nd Circuit court decisions in Kelly-Brown v. Oprah
  • The legal fine line between a mere “catchphrase” and a trademark use
  • Practical implications for clearance

SPEAKERS
Laura Gustafson, Pillsbury counsel

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Please join us at the Video Games and Digital Media Conference on June 10, 2013. Pillsbury attorney Cydney Tune is co-chairing this upcoming conference hosted by the American Bar Association Forum on the Entertainment & Sports Industries. She is also speaking on the topic of “Data Privacy, PII, and Online TOU/Privacy Policies.” Jim Gatto will be speaking on the topic of “Gamblification! Interaction Between Social Games and Online Gambling.”

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On May 21, 2013, Washington’s governor signed a new law protecting employee social networking accounts.

The new law, which goes into effect on July 28, 2013, prevents employers from requesting, requiring or coercing an employee or applicant to disclose login information for the employee’s personal social networking account. Employers also may not ask employees to access such accounts in the employer’s presence; add the employer to the employee’s contacts; or alter third party access settings. Work-related accounts and devices paid for or supplied by the employer are exempt.

If an employer inadvertently receives login information, it is not liable for possessing the information but may not use it to access the employee’s account.

Importantly, employers may still:

  • Comply with the requirements of state or federal law;
  • Conduct investigations to comply with laws against work-related employee misconduct based on receiving information about the employee’s activity; and
  • Conduct investigations based on receiving information about the unauthorized transfer of proprietary or confidential information or financial data.

The law creates a private cause of action for employees and applicants. Prevailing plaintiffs may be awarded equitable relief, actual damages, a $500 penalty, and reasonable attorneys’ fees and costs. However, a court may also award reasonable expenses and attorneys’ fees to a prevailing defendant if the judge determines that the action was frivolous and without reasonable cause.

Washington joins Maryland, Illinois, California, Michigan, Utah, Arkansas, and Colorado in enacting such laws. New Mexico has enacted similar legislation, but it prohibits access only to the accounts of prospective employees.

To read more about this law, see Substitute Senate Bill 5211.

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The U.S. Department of the Treasury has targeted Liberty Reserve S.A. as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act (Section 311).   According to Financial Crimes Enforcement Network (FinCEN) press release, Liberty Reserve – a web-based money transfer system or “virtual currency” – is specifically designed and frequently used to facilitate money laundering in cyber space.

Additionally, FINCEN published a regulatory finding explaining the basis of the actions anda notice of proposed rulemaking that, if adopted as a final rule, would prohibit covered U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign banks that are being used to process transactions involving Liberty Reserve.

The regulatory enforcements around virtual currency appear to be increasing. If you have not recently reviewed your regulatory compliance with your counsel, now is a good time to do so.

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On May 20, 2013, the New Jersey Assembly passed – by a vote of 77 to 0 – a revised bill barring employers from seeking access to employees’ social media accounts.

The bill incorporates changes suggested by Governor Chris Christie, including the elimination of a private cause of action. Instead, the law will be enforced by the New Jersey Commissioner of Labor and Workforce Development. Employers would be subject to a maximum civil penalty of $1,000 for the first violation and $2,500 for each subsequent violation.

Under the proposed law, employers may not request or require a current or prospective employee to provide a user name, password, or any other form of access to a personal social networking account. The law applies only to purely personal accounts; the law does not apply to accounts used for business purposes or policies regarding employer-issued devices.

The revised bill now awaits passage by the state Senate, where the prior version of the bill passed with a vote of 38-0.

For more information, please read the Social Media Privacy Bill.