Reinventing Paper

While the intuitive starting point for most inventions is to create something that doesn't exist, there is also the "let's make it better" approach. Then there is the seldom achieved, seldom useful, even less seldom relevant "reinvent the wheel" approach. E-ink technology has reinvented paper and is finally beginning to see consumer product deployment. Essentially digital reflective sheets that can "etch a sketch" an image, say text for example, on a single sheet--the technology allows for "paper" that is reprinted ad infinitum, without the press, the ink, or the pulp. Ideas like this really do seem like magic.

Definition-Private Placement Memorandum

And now for today's definition: PPM, a.k.a. Private Placement Memo. A private placement is a direct securities offering to a limited number of investors, that is NOT registered in the traditional sense with the SEC (in contrast, Google's IPO was a public offering). Private placements are offered to a wide array of individuals and institutions, but are typically offered to sophisticated high net worth types (funds, angel investors, high net worth individuals, etc.). Under certain circumstances, these types of offerings can avoid the cumbersome registration requirements imposed by the Securities Act upon public offerings. Hence such offerings are attractive for smaller more discreet project finance (e.g. a film, real estate development, start up venture, etc.)

The PPM is the document that sets forth the terms and conditions of the offering and makes disclosures regarding the risk factors, the management team and the prospective market for the project being financed. Other salient points included within the memo (these are by no means exhaustive) are summaries of the company's business and financials as well as investor rights (antidilution protection, registration rights, voting rights). Private placement memoranda should be drafted to be as efficient and informative as possible to serve investors with limited time and competing opportunities. The other key consideration is that the document is not misleading, does not make material omissions and generally is lucid about the probability of failure so that it does not run afoul of the Securities Act and any applicable state laws).

Section 230--User Content Quicksand

Several posts ago, I discussed section 230 of the Communications Decency Act of 1996 and its protection of online operations near, far, and wide.  So for those of us who relish a digital future, this should seem like a great triumph, right?  Not quite.  

For most sites soliciting user content or materials, safe harbors are not just the norm, they are absolutely necessary.  This is the case with the DMCA safe harbor provisions and also with Section 230.  If you look at the terms of service for most of these sites you will notice that the site operators expressly disavow any connection with the comments and opinions of their users. Further, they disclaim any liability or affirmative duty in deleting or otherwise censoring content they deem offensive for whatever reason.  It is here that the Section 230 safe harbor is critical.  Recall that Section 230 was created to prevent liability for online operations that actually policed content, as opposed to being laissez faire.  A good idea in the abstract.  But every good idea shows its bad side when applied.

So now Truedater.com, whose own byline reads "Join thousands who use TrueDater.com to share reviews of whether the information in people's online dating profiles is true or not," is most likely free from liability.  And did you know that the operators of DontDateHimGirl.com, whose entire purpose is to database "real" information from jilted women on philandering louses, are also protected?  So what's the recourse for a person maligned on DontDateHimGirl or Truedater?  How helpless is that person to protect his sex life or his personal history from being persistently accessible throughout the world?  

The situation is unfortunately not black and white.  In fact, some high profile defamation and hate speech issues that have arisen on sites that, without question, improve our lives.  Consider the John Seigenthaler Sr. controversy.  Segenthaler Sr. was  a featured biography via Wikipedia's now famous volunteer submission system.  However, the author stated as fact that Seigenthaler was a suspect in the assassination plot of president Kennedy.  The fallout from this episode was severe and well publicized, ultimately resulting in a registration requirement for Wikipedia submissions. Unable to identify the author as Wikipedia had no registration requirement at the time and unable to pursue Wikipedia itself because of Section 230, Seigenthaler was left utterly without recourse.  (Ultimately the author was identified and admitted to having posted the erroneous information as a prank.  Since then he and Seigenthaler have made amends.) Though Wikipedia retracted the offending entry, the damage had already been done.  Angry and mindful of the statutory irony he faced, Seigenthaler said of Section 230 in an op-ed published in The Tennessean, that it "enables and protects . . . volunteer vandals with poison-pen intellects."

Just this past February, Craigslist, everyone's favorite dating, trading, meeting, apartment listing, and everything else site was sued by the Chicago Lawyers' Committee for Civil Rights Under Law, for alleged violations of the Fair Housing Act.  The Act clearly prohibits discriminatory housing advertisements.  Yet Craigslist users routinely post  advertisements with cuddly caveats like "NO MINORITIES" and "Requirements: Clean Godly Christian Male."  Craigslist usually yanks such ads in accordance with its policy requiring classifieds to adhere to the Fair Housing Act.   However, Craigslist, with a staff of less than twenty people and a heavy automation, does not prescreen its ads.  And in the face of this lawsuit, CEO Jim Buckmaster, has expressly invoked Section 230 in defense of relying on users to report violations of the Act.  

So now we're stuck in the legal quicksand--how do we move against the sites that build their reputation on sanctioned defamation?, how do we curb anonymous slander without hurting open source sites?, do we do nothing and hope we don't sink? While I agree safe harbors are essential, I do not believe the status quo is the right approach.  Where the original intent of Section 230 was to encourage site operators to police their operations it has simultaneously created a wild west environment, complete with freak shows and free for alls.  Since there's no denying "open source" content is the next big thing in our digi-lifestyle, a reexamination of Section 230 is seriously warranted.  For if any of the above is making you scratch your head you are not alone.  The question is how do we strike a balance?

From Pacman to PS3 – The Law of Video Games

From Pacman to PS3 – The Law of Video Games

May 2nd, 6:30-8pm, NYCLA - The Lounge – 14 Vesey Street

FREE FORUM

Video games are assuming their rightful place in the marketplace, rising from a niche product to a mainstream staple. Understanding the daily legal issues that confront the video game industry is no less intricate than a high score on the latest games flying off the virtual entertainment shelves. There are no cheat code and no hacks to simplify the host of legal, social, and technological issues that a game lawyer, developer, and consumer must grapple with.

This panel is designed to break through common assumptions and break down the issues for players and businesspeople alike. Panelists from major law firms will discuss the intellectual property, licensing, entertainment, and contractual considerations and reveal the inner workings of the industry.

This is a must for anyone participating in the game industry or simply interested in understanding how the industry works.

Speakers:

Steve Masur, MasurLaw
John F. Delaney, Morrison and Foerster
Steven I. Wallach, Ladas & Parry LLP
Alan Behr, Alston & Bird LLP

Moderator:

Olivera Medenica, Wahab & Medenica LLC


RSVP:
Diana Lamb
dlamb@nycla.org
212-267-6646 x200

Resistance is Futile—Licensing the Living Computer

Our race to become a race of Borg got one step closer to the finish line based on recent reports of successful neural cell/processors. European researchers have developed "neuro-chips," fusing living brain cells with circuitry. This is to be distinguished from previously successful attempts to create neural interfaces (using neural implants, typically plates, directly placed on the brain or the cortex) with an external apparatus (e.g., brain pacemakers, experiments to control robotic appendages, etc.). Here is the first reported case of actually fusing a chip with a neuron and achieving active communication.

Now being that it’s my job to ask this question, I shall ask it: “So what’s the legal on that?” The article goes on to state “It could still be decades before the technology is advanced enough to treat neurological disorders or create living computers, the researchers say, but in the nearer term, the chips could provide an advanced method of screening drugs for the pharmaceutical industry.” Living Computers! These are all terrifically laudable goals, but it does not take a genius (though I suspect the researchers involved are indeed genius caliber material) to recognize that there will be legal implications. What are the rights, business and personal surrounding a system based on such chips? How does one seek to structure licensing arrangements where the product is based on living tissue as much as it is artificial? What are the implications where the neurons are taken from a particular person, a celebrity or deceased individual?

In other words, is there a developing law of cyborgs or will policy be left to a malodorous potpourri of legal concepts? My point in bringing this up is that proactive discussion on the social/ethical/legal implications of these and other technologies (consider cloning) should not be left to reactionary forces and political extremists. So as these innovations take place right before our eyes, we should not be caught blindsided.

My poor man’s neural graft, or the net, revealed these scant few resources on “cyborg law/policy”

The Institute for the Future is a non-profit research organization located in Palo Alto, California. Founded in 1968, the Institute conducts basic research on the futures of emerging technologies, health, and global business trends. It also works with clients on targeted research projects.

More Than Human : Embracing the Promise of Biological Enhancement (Book)

KurzweilAI.net features the big thoughts of today's big thinkers examining the confluence of accelerating revolutions that are shaping our future world, and the inside story on new technological and social realities from the pioneers actively working in these arenas.

Tranche Financing

Recently, I was asked the meaning of "tranche financing" and how it impacts a private offering that a client was contemplating. Since it's been a while from our last legal definition entry, I thought I'd share this with you, since in the legal profession faking fluency in Norman French is half the success equation.


The word "tranche" is a derived from French and simply means "a slice." Used in the structured finance world, slicing things up is intuitive. Hence multiple classes of securities for a single offering are often referred as tranches. And a party may refer to the cash flow from a class of security being sold as a tranche.Each tranche often carries different terms and risks (e.g. voting rights, maturity, cash flows, etc.)In a typical private offering for example, if there are multiple classes of shares or membership interests (e.g. the Class A, Class B, Class C), these may be considered tranches. The senior or preferred tranches are paid off first usually with the junior tranches being subordinated.The holders of a particular tranche may participate on a parri passu basis (i.e., all investors within that tranche are treated equally).And finally, the aggregate of a deal's tranches make up the deal's capital structure.

Kaiser Wahab

ATTACK of the Apple Corps !

As an attorney there are those times, you rub eyes squint and truly say, you're gonna sue on that? For those of you not in the know, Apple, who always has multiple litigation fronts, is this time defending what hopes to be the closing chapter in the battle between it and the Beatle's Apple Corp. What is the Corps you may ask? It is a company started by the Beatles in 68, owned by Paul McCartney, Ringo Starr, the widow of John Lennon and the estate of George Harrison, that believe it or not, was one of the first mega corps spun off from a mega band. It was to do music distribution, retail, film production, and even electronics, with its own plans for an apple shaped radio. Forward looking and prescient, but that was then. Ironically, legend has it the business was borne initially out of the band's desire to dupe the tax man and shelter their sizeable earnings.

Over the years Steve's Apple, the one with the Ipod has jousted with Apple Corps, over the use of the trade name Apple in conjunction with a host of services and products. Several settlements ensued, in each case broadening the scope in which Steve's Apple could ply its wares. In 91' Steve's Apple paid Apple Corps almost 30 million to continue its operations, including the playback of midi on its machines. So in actuality, the current suit, which hinges on Apple's iTunes allegedly violating the terms of the 91’ settlement agreement is a contract case, not a trademark case.

The irony is that using basic trademark standards, I find it hard to believe that an American jury (though English law likely applies as well) would find that there is a likelihood of confusion between the two marks today. In terms of strength, Steve's Apple is practically the icon of a global religious movement. In terms of visual difference, one is a stylized abstracted version of an apple, while the other is clearly photographic. One is called Apple the other Apple Corp (although this I know is a weak argument). And the differentiators go on. One must keep in mind however, the original settlements that gave rise to the current one were forged at a time when Steve and his Apple were far from ripe, green even—consider that one of the original settlement figures was 80K versus the last of 30 million.

As the current dispute seems to have Steve's Apple in a jar, the question is will its counsel's attempt to jam the square peg into the round hole, by claiming iTunes is merely an "electronic device" and therefore compliant with the settlement agreement going to work? So the moral of the story is be forward looking with settlement agreements. They may end up being straight jackets.

Kaiser Wahab

Taxonomy of Blawgs--Or How the Hell do I Get Through all this Information?

"Taxonomy"-noun, Division into ordered groups or categories. Lawyers love this word. It's lofty, it's complex, it speaks to soul of jurisprudence, standards, measures, and orderly classification of human enterprise. It is also very dubious when applied in a real world setting.

That however has not deterred Ian Best a 3L at Moritz College of Law, who has undertaken to build his own legal blog taxonomy [http://www.3lepiphany.typepad.com/]. His goal: study the evolution of the blogging phenomenon among lawyers. Are there fundamental cultural, substantive, or other differences between a small firm, large firm, or solo's blogs? Are there observable trends in how these things are shaping the practice or how we interact with our clients? Certainly blogging has transformed the industry's tolerance for attorney promotion (just consider the gripe of a colleague in 98' who said the profession regarded having a pulse as unethical attorney advertising). As lawyers build everything from practice treatises to kaleidoscopic windows into the esquire brain, having a variety of taxonomical approaches helps us make better use of the information and helps us strategize for the future.

Ian describes his blog as "a comprehensive taxonomy of legal blogs as an online service to the legal profession. I believe that the blogosphere suffers from a lack of an efficient infrastructure. 3L Epiphany will exemplify a cohesive system for organizing legal blogs."

While there are other blawg catalogues out there, Ian has compiled his based on a unique perspective on the playing field-it's less about being a search engine, than an academic exercise. So I encourage everyone to give it a look through and see if its approach spurs discourse.

Kaiser Wahab