Changes in Global Privacy Affect Small Business Too

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Changes in Global Privacy Affect Small Business Too

In case you missed it, on October 6, 2015 the Court of Justice of the European Union (CJEU) issued a long-awaited privacy ruling in the case involving Maximilian Schrems, the Ireland Data Protection Authority (DPA) and Facebook. Back in 2000, the EU Commission decided that personal data sent to US organizations that sign up to the Safe Harbor scheme is adequately protected. Safe Harbor organizations self-certify compliance with certain privacy principles, and the scheme is enforced by the US FTC.


Simply put, Schrems sued to prohibit transfer of his personal data from Facebook Ireland to Facebook in the U.S. due to widely perceived flaws in U.S. data protection following the Edward Snowden NSA revelations.

Why it Matters

Over 5,000 U.S. companies “self-certify” under Safe Harbor, and their European partners and customers rely on Safe Harbor for data transfers into the U.S. The decision may impact many small to medium sized business who use social media for marketing and business development, as well as businesses that use cloud-based services for gathering, processing and sharing data. Transfers of Personally Identifiable Information (PII) from the EU to the U.S must either be authorized by national data protection authorities, or be able to rely on one of the legal exceptions.

Although the Safe Harbor companies publicly committed to apply the Safe Harbor Privacy Principles to the personal data they brought into the U.S. (and some companies passed these commitments on to other entities under Onward Transfer agreements), companies that disregard those commitments, with regard to either stored data or new data transfers, could expose itself to FTC enforcement against “unfair or deceptive practices” or judicial complaints based on U.S. contract, fraud, or tort law, as well as to enforcement in the EU – such as complaints before labor tribunals, courts, and data protection authorities.

Don’t Panic, Yet

While the decision is likely to have a significant impact on the transfer of personal data from the EU to U.S. recipients, EU leaders say it’s not time to panic yet. Experts have pointed out the alternative legal bases for transatlantic data transfers that exist, such as contracts, Binding Corporate Rules or actual, express consent. Many businesses may be able to use these methods and continue their transatlantic data transfers.

Domestic Developments

At the same time, California leads the U.S. in enacting new privacy legislation. Last week California passed legislation that may equate to what the EU wants to see on the federal level. According to §1546.1 b) of CalECPA any government entity must have a warrant, wiretap order, order of electronic reader or a subpoena if they want to compel any individual or a service provider to disclose information stored on their devices (mobile phones, computer, tablets, tv, servers you name it). §1546.1 c) states that government agencies cannot access, either physically or remotely, a device unless they have a warrant, wiretap order, consent of the authorized possessor of the device, if the government in good faith, believes there is an emergency that could jeopardize someone’s life or physical integrity (in which case they’ll have to get a warrant within 3 days later) or in case the devices are confiscated from inmates in state prisons.

Concerned about whether your business is at risk for violating EU data protection rules? Don’t be. We offer a FREE, no-obligation one (1) hour consultation to identify potential issues. The professionals at the Adler Law Group can help you review, enhance and adopt standardized contracts and implement methodologies for approaching these challenges by setting objectives, determining scope, allocating resources, and developing agreements that will efficiently and effective manage risks, while keeping pace with the business.

Please call: (866) 734-2568, click:, or write: David @

Using Copyright To Protect Fashion Designs

A recent case from the 6th Circuit Court of Appeals examined the question “Are the stripes, chevrons, zigzags, and color blocks that adorn most cheerleading uniforms sufficiently creative to be protected under US Copyright law?” The case, Varsity Brands et al. v. Star Athletica, No. 14-5237 (6th Cir. 2015), involves a lawsuit between competing suppliers of cheerleading uniforms and “warm-ups.” Plaintiff Varsity, claimed that defendant Star had copied protectable elements of it’s uniform designs. The District court agreed with Star, but the Court of Appeals reversed. The case holds important lessons for creative professionals seeking to protect their original work in an increasingly completive environment where “knock-offs” and copycat designers are all too common.

Back in 2013, I published “Fashion Law: Protecting Brands and Designs,” an article in Landslide, the legal publication of the Intellectual Property section of the American Bar Association. The article is available here. Although the article addressed protection under Trademark and Patent, in addition to Copyright, one of the primary issues was and is when, if ever, can the design features incorporated into the design of a useful article be identified separately from, and exist independently of, the utilitarian aspects of the article?” The Varsity case provides useful insight and analysis on that question.

Are Fashion Designs Protectable Under Copyright?

The Varsity case answers with a resounding “yes.” First, although copyright protects creative works of authorship fixed in a tangible medium of expression (17 U.S.C. 102(a)), protection requires a certain amount of “originality.” Because so much of fashion design is derivative of what has come before, the hurdle for protection of fashion designs is the tension with §102(a)(5) of the Copyright Act. (17 U.S.C. 102(a)(5)) That section protects pictorial, graphic, and sculptural aspects of apparel if, and only to the extent that, the design features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” (17 U.S.C. 101) §

Courts have viewed this requirement as requiring either “physical separability” or “conceptual separability,” a test that they have struggled to pin down. However, courts that have addressed the issue in the case of designs of clothing have routinely viewed clothing utilitarian because they “cover the wearer’s body and protect the wearer from the elements.” Celebration Int’l, Inc. v. Chosun Int’l, Inc., 234 F. Supp. 2d 905, 912 (S.D. Ind. 2002) “Unlike a patent, a copyright gives no exclusive right to the art disclosed; protection is given only to the expression of the idea—not the idea itself.” Mazer v. Stein, 347 U.S. 201, 217 (1954)

Guidance For Lawyers That Advise Fashion Designers.

In order to help fashion designers protect their ideas, it is important to understand how the court evaluates the protect ability of design elements. The Court engaged in a lengthy examination of the various tests applied by different courts before adopting the widely used “hybrid” approach. According to the Court the best approach to determining whether a design is a copyrightable pictorial, graphic, or sculptural work is to ask a series of five questions from the Copyright Act: 1) is the design a pictorial, graphic, or sculptural work? 2) Is it a design of “an article having an intrinsic utilitarian function?” 3) What are the utilitarian aspects? 4) Can the viewer of the design identify “pictorial, graphic, or sculptural” features separately from the utilitarian aspects? and 5) Can those features exist independently? The Court added that the design process may also help determine whether a design feature is necessary to the design are or to the functionality.

Key Take Always From The Varsity Case.

First, Varsity started from a position of strength. It has registered it’s designs with the US Copyright Office. The Court gave strong deference to the Copyright Office. The lesson for designers is that it’s never too early to seek registration of your work.

Second, be mindful of the aesthetic versus functional distinction during the design process. Design elements that are required to make the item function as a garment will not be protectable.

What Marketers Need to Know About the FCC’s Recent TCPA Ruling

On July 10, 2015, the Federal Communications Commission (“FCC”) issued a Declaratory Ruling and Order (“Declaratory Ruling”) in response to 21 separate requests seeking clarification or other action on the Telephone Consumer Protection Act (“TCPA”). The Declaratory Ruling has implications for any entity that utilizes wireless phone numbers for contacting consumers. The most relevant highlights of the Declaratory Ruling are described below.

The TCPA makes it unlawful to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system (“ATDS”) or an artificial or prerecorded voice to any telephone number assigned to a cellular telephone service, or any service for which the called party is charged for the call.

First, just to clarify, this is not a “new federal law.” This Declaratory Ruling was issued by the FCC in response to requests seeking clarification on the TCPA.

1. The Ruling expands the meaning of ATDS (or “autodialer”) and requires a case-by-case determination of their inclusion within the reach of the TCPA.

The FCC does not distinguish between calls to wireless telephone numbers made by predicative dialers and calls made “when the equipment operates independently of such lists and software packages.” Recognizing the developments in technology, the FCC stated that an ATDS is defined by the basic capacity to dial numbers without human intervention.” “Capacity” does not exempt equipment that lacks the “present ability” to dial randomly or sequentially. Rejecting definitions that fit “only a narrow set of circumstances” in favor of broad definitions which reflect a legislative intent to accommodate the full range of telephone services and telemarketing practices,” the FCC believes that the TCPA covers capacity of a current configuration and potential functionalities.

As a result, the Ruling does not specify the “exact contours” of an autodialer. Therefore, there is no hard-and-fast rule to enable a business to easily determine compliance risks under the TCPA. The bigger – and still unresolved – questions is whether dialing systems that require human intervention are or are not autodialers. In fact, the FCC expressly rejected a request to adopt “human intervention” as the test to identify whether a dialer is an autodialer. Still open is the question of whether human intervention that will take equipment outside the scope of the autodialer definition.

2. The Ruling clarified issues related to calling “reassigned” wireless numbers: a “called party” is “the [current] subscriber, i.e., the consumer assigned the telephone number dialed and billed for the call, or the non-subscriber customary user of a telephone number included in a family or business calling plan” as opposed to the “intended recipient” or “intended called party.”

This is really about “consent” of the called party to receive a call/text message. Voluntarily providing a cell number has previously been held to constitute initial consent from the current subscriber or non-subscriber customary user of the phone, as of the time the call is made.

In the case of a number being reassigned, the FCC recognized that a service using an ATDS may not have actual knowledge that the number has been assigned. To address this, the Ruling provides that, so long as a caller does not have actual knowledge that the number has been reassigned, it may make one call to a reassigned number without liability. Note that the FCC stated that simply by placing a call to a reassigned wireless number, the caller has constructive notice that the number has been reassigned, and can incur TCPA liability for every non-compliant call placed thereafter. This conclusion was criticized by the two dissents who asserted that the one call standard would require callers “to do the impossible” (discern whether a number has been reassigned from a single call, without more).

2. The FCC reiterated that a called party may revoke consent at any time and through any reasonable means, and callers may not limit the manner in which revocation may occur. IV. Exceptions for Pro-Consumer Messages About Time-Sensitive Financial and Healthcare Issues

4. A one-time text immediately sent in response to a consumer’s request for information, such as a coupon to apply to an offer, does not violate the TCPA, however the Ruling casts doubt on whether Prior Express Written Consent can be established on the basis of a text opt-in response to an advertisement that contains the TCPA required disclosures.

Given the guidance and ambiguities from the FCC’s Declaratory Ruling, now would be a good time for marketing firms to review their phone and text message marketing polices:

  1. Review policies around the collection and use of phone numbers provided by consumers;
  1. Ensure that the processes for collecting phone numbers distinguishes between wireless and residential numbers, and have opt-out provisions in place to ensure that users of reassigned numbers are not wrongfully contacted;
  1. Review wireless number lists for currency and accuracy; and
  1. Review and assess messaging and marketing programs and vendors.

Pinterest “Buyable Pins” And Ecommerce Liability

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Last week, Pinterest announced the release of “Buyable Pins” – streamlining the online purchasing process that enables Pinterest users to buy pinned items from several stores without having to leave the Pinterest site or app.  For consumers, Buyable Pins make it easier to move from a Pin to purchase. For businesses, this opens a door to a large new audience who loves to shop.

Here’s everything you need to know about selling on Pinterest and potential areas of Ecommerce liability.

Online Contracts Reduce Merchant Risk. Sometimes.

A substantial number of court opinions in recent years have looked at the validity of various provisions contained in online contracts. The starting point for most analyses is the point of contract formation, because terms of online contracts are enforceable only if the contract was validly formed. Courts have scrutinized ecommerce contracts, primarily in four areas: (a) Terms of Sale; (b) Returns/Exchanges; (c) Governing Law & Venue; and (d) Arbitration. Quite often, courts have refused to enforce such terms, due to deficiencies in the formation of online contracts.

As a general proposition, formation of contracts (offer and acceptance) and enforceability of contractual provisions (choice of governing law) are matters determined by reference to state law. However, in the United States, federal courts are often required to determine matters of state law and most states have relatively uniform requirements with respect to the three principal concepts in the determination of contract enforceability: offer, acceptance and consideration.

With respect to contract law in relation to online commerce (ecommerce), contracts generally take one of two forms: (1) “click-through” or “click-wrap” agreements, and (2) “browse-wrap” agreements, often referred to as Terms of Use or Terms of Service. It is worth noting that a recent Eastern District of New York court decision classified online contracts in four categories (a) browsewrap[sic]; (b) clickwrap[sic]; (c) scrollwrap[sic]; and (d) sign-in-wrap. Berkson v. Gogo, LLC, Case No. 14-CV-1199 (USDC E.D.N.Y. April 9, 2015). Functionally, the last three tend to look substantially similar (e.g. there is some action required to consent to the agreement, see discussion of “consent,” below) and will be treated as such for purposes of this article.

This is particularly important for merchants using “Buyable Pins” on Pinterest. Unless the online terms of the agreement between the merchant and the customer are validly binding and enforceable, many of the protections offered to the merchant in the online contract will not be available.

As noted above, courts have frequently refused to enforce provisions around a merchant’s ability to modify some terms post-sale (Terms of Sale), the availability of and methods for returns and exchanges, how and where lawsuits may be filed (Governing Law & Venue), and requirements to submit disputes to arbitration. This presents particular issues for Buyable Pins. Merchants need to think carefully about how a user is presented with the opportunity to accept or reject an online contract, and how the user “manifests consent to the agreement.”

The so-called “click-wrap” agreement is usually the agreement formed when a user purchases goods or services through an ecommerce shopping cart application. A user is presented with the online terms and conditions and must “click-through” as part of the transaction.

Consenting to Online Terms.

“Click-wrap” agreements derive their name from the shrink-wrap agreements that were first incorporated into commercially-distributed software. Users were deemed to have accepted the terms of the agreement by opening the package and installing the software. In ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1450 (7th Cir.1996), the court held that a user was bound by the terms and conditions of a software license agreement (contract) included in a users’ manual within the packaging, and which was displayed on a computer screen upon installation and use of the software. Such contracts are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).

Consenting to Arbitration, Choice of Law and Venue.

Another concern is the scope of the terms and conditions applicable to the contracts, and whether additional terms may be incorporated by reference or presented after the transaction has been processed. Courts have been severely reluctant to enforce additional contract terms that would affect a user’s rights, such as the user’s ability to enforce the contract, including arbitration provisions, choice of law, and choice of venue provisions in online contracts, especially where such terms were communicated after-the-fact. This issue was addressed by a federal court in Schnabel v. Trilegiant. 697 F. 3d 110 (2nd Cir.2012)

Consenting to Changes in Price.

A very recent case involving Safeway grocery stores challenged a merchant’s practice of charging slightly different (and higher) prices for items ordered online than those purchased in-store. The in-store prices varied day-to-day. Typically, after a customer placed an online order, the items were actually selected from a physical store and delivered to the customer. At issue was the enforceability of Safeway’s “amend-at-will-without-notice” clause contained in the online terms.

Finding the clause unenforceable, the court reasoned “beyond the impracticality of expecting consumers to spend time inspecting a contract they have no reason to believe has been changed, the imposition of such an onerous requirement on consumers would be particularly lopsided, as Safeway is aware that it has — or has not — made changes to the Terms and is the party to the contract that wishes for the new terms to govern.” Rodman v. Safeway Inc., 2014 WL 6984703 (N.D. Cal. Dec. 10, 2014)

Best Practices For Merchants.

“Buyable Pins” highlight the legal risks inherent in ecommerce contracts. Seamlessly moving form Pin to purchase will no doubt increase sales and customers and reduce abandoned virtual shopping carts. However, merchants need to be mindful that the risk of losing a lawsuit because of an unenforceable contract is greater than the risk of losing a sale because a customer had to objectively consent to that contract.

Here are six “best practices” to ensure that the online contract formation process is bullet-proof: 1) use a multi-step account activation (or transaction confirmation) process where the user is shown the contract (can be in a separate “pop-out” window); 2) use a notice appearing in bold print stating, “Carefully read the following terms and conditions. If you agree with these terms, indicate your assent below;” 3) present the terms and conditions in a new window, with a scroll bar that allows the user to scroll down and read the entire contract (the Berkson “scrollwrap” agreement; 4) link to a printer-friendly version to read the contract printed on paper or view it on a full-screen; 5) display a box and the words, “Yes, I agree to the above terms and conditions” viewable without scrolling; and 6) have a functional requirement that the user click the box in order to proceed to the next step.

While I cannot guarantee that using these techniques will ensure that your online contracts will be fully-enforceable 100% of the time, it will make it exceptionally hard for a potential plaintiff to argue that there was no enforceable contract.

When it comes to addressing emerging ecommerce legal risks, it is often difficult to determine whether you should slow down, change course, signal for help, or simply muddle through. Often, companies need to quickly identify potential issues, assess the risk, and implement controls to steer clear of unneeded exposure. The professionals at the Adler Law Group can help you review, enhance and adopt standardized contracts and implement methodologies for approaching these challenges by setting objectives, determining scope, allocating resources, and developing agreements that will efficiently and effective manage risks, while keeping pace with the business.

Focus | Vision | Perspective | Passion

Executives face a confusing and dynamic set of challenges ensuring their business remains legally compliant. Yet few can afford the highly-qualified and versatile legal staff needed to deal with today’s complex legal & regulatory environment. Adler Law Group was created to provide clients with a competitive advantage by enabling them to leverage their intangible assets and creative content in a way that drives innovation and increases the overall value of the business.

For a FREE, no-obligation 1 hour consultation to learn the best ways to identify, protect and leverage your ideas, please call: (866) 734-2568, click:, or write: David @

Adler Law Group – Providing innovative legal counsel that elevates aspirations to achievements.™

Three Idea & Design Protection Tips For Interior Designers Ping® July 2015


Interior Design can be a competitive business. It is no secret that one designer may begin a project, only to have it completed by another, including a former employee. As a result, Designers need to be vigilant about protecting both their designs and relationships. The case of Hunn v. Dan Wilson Homes, Inc., 13-11297, 14-10365, 114 qUSPQ2d 2002 (5th Cir 2015) offers several lessons for Designers.


Ben Lack, who was employed as a draftsman at the Plaintiff architectural design firm Marshal Hunn Designs (HD), resigned from his job while in the middle of a project for the firm’s client, Dan Wilson Homes, Inc. (DWH). After Lack’s resignation, Lack was hired by DWH to complete the project. HD sued Lack and DWH alleging that they secretly agreed in advance with DWH to cut HD out of the business. The court ruled in favor of Lack (and DWH) finding they never entered into any “secret agreement” and there was no merit to the eight other legal claims, including copyright infringement and false designation of origin under the Lanham Act.


DWH is a custom home construction company. DWH contracted with HD to produce plans for four (4) custom homes. DWH wanted the plans drafted by Lack. Lack was the only HD employee who worked on the four custom homes for DWH and HD’s only representative at all weekly meetings with respective homeowners.

While the home construction projects were still underway, Lack informed HD of his desire to resign. Lack also requested by email that a friend of his convert some of the project files into AutoCAD versions. This conversion was required because Lack maintained his own copy of AutoCAD software on his home computer.

HD permitted draftsman to take home files because they often worked on projects on their own home computers as well as work computers. Lack had permission to work on the files at home.

After Lack’s employment ended, HD ask Lack to return physical files related to the project, but not the AutoCAD files.

The relationship between DWH and HD deteriorated. DWH offered to pay HD a prorated amount for the work completed up to the date of termination of Lack. HD refused. DWH later tendered payment for the full contract price, even covering items and services that had not been completed.

HD declined to accept payment and responded by filing a complaint alleging eight causes of action: 1) copyright infringement, false designation of origin under the Lanham Act, 3) breach of contract, 4) breach of fiduciary duty, 5) breach of covenant not to solicit, 6) tortious interference, 7) violation of the computer fraud and abuse act, and 8) conspiracy.

During his deposition, Lack indicated that he believed he would have had at least two more weeks of employment after tendering his notice of resignation, and that he would be able to complete the plans. DWH also believed that Lack would complete the plans under the employment of HD.

The District Court granted summary judgment in favor of the defendants Lack and DWH on all claims. HD appealed the judgment. The appellate court affirmed the District Court’s decision.


The District Court found that there was no breach of contract because DWH’s only duty was to pay for the services which he offered to do.

The District Court found there was no breach of fiduciary duty because any duty terminated upon termination of employment, and Lack did not disclose trade secrets or any confidential information. Although HD alleged that the AutoCAD files were confidential and proprietary information, the court held that they were not because HD had disclosed them to Lack without restriction.

The District Court found that there was no violation of the computer fraud and abuse act because Lack never exceeded his authority. HD routinely permitted employees to take files home and put them on their personal computers.

Although Lack had a non-complete clause in his at-will employment agreement, the Court found there was no violation because the clause was unenforceable. The clause states “in the event you leave or are separated from Hunn Designs’ employment, you agreed not to solicit, either directly or indirectly, business from, or undertake with any customers serviced by you while the employment of Hunn Designs, or any other Hunn Designs customers for a period of two years thereafter.”

The District Court held the non-compete clause was unenforceable do to a lack of independent consideration. Continued employment in at-will agreement is illusory.

The District Court ruled that even if the drafts of house designs were copyrightable, there was no violation of copyright because of the existence of an implied license authorizing use of the designs.

The court found particularly interesting “the fact that the home owners themselves essentially came up with their design ideas and sought to have those self designed homes built [after their ideas were] placed into the drafting stage.”

The District Court cited the 7th Circuit case of I.A.E., Inc. v. Shaver 74 F.3d 768 (7th Cir. 1996) for the proposition that an architect in a similar situation had granted an implied license. Even though the architect in Shaver testified that he did not intend for use of the drawings past the drafting stage unless he was the architect on the project, this was not supported by the record.

The court found there was no violation of the Lanham ask prohibition against false designation of origin, because there was no evidence that use of the plans had a substantial economic effect on interstate commerce, as required by the Lanham Act.

Take Aways:

Based on my review of the court’s opinion, there are potentially three (3) things the Plaintiff (Hunn) could have done differently that may have changed the outcome of this case. First, have a clear, written policy in place defining what constitutes trade secrets and other proprietary information and proper methods for handling those. Second, have policies restricting how and when employees may take company property and files home, and addressing storage and return of property and files. Third, create and enforce clear conditions for access, distribution and use of drafts, proposals, files and other works-in-progress to avoid inadvertently granting an implied license to third parties such as contractors, consultants or clients.



Should Google be forced to offer privacy apps? EU fight offers test

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Originally posted on Fortune:

An app maker called Disconnect thinks consumers have a right to block advertisers, including Google [fortune-stock symbol=”GOOG”], from tracking what they do on their phones. The search giant, unsurprisingly, doesn’t see it this way and has repeatedly thrown Disconnect out of its Google Play store—meaning Android users have no easy way to access the tool.

Now, the app maker has filed a complaint with the EU, arguing that Google’s behavior is anti-competitive. The outcome could determine whether large companies like Google and Apple should be obliged to distribute more pro-privacy tools on their platforms.

In case you’re unfamiliar, Disconnect works by blocking third party advertising and analytic services that lurk in the background when consumers visit an app or website (users can view what sites Disconnect is blocking, and whitelist them if they choose). The tool can also help webpages load faster thanks to less ad bulk.

In its five…

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Illinois Updates Eavesdropping Law, Ambiguities Remain

Illinois has recently enacted a revised version of the Eavesdropping Act. (720 ILCS 5/14, et. seq.) Prior to 2015, Illinois was a “two-party consent” state. The Act prohibited recording police and other public officials without their consent. There were several prosecutions under the old version of the law. The new law makes it legal to make such recordings in public without consent.

Under the old law, the statute had the effect of barring the recording of loud arguments on the street, political debates in the park, or even public interactions between citizens and police officers. While the new law attempts to create a balance between privacy and the need to preserve the details of conversations with authorities, it is being criticized for creating a new set of problems.

Chief among the concerns from both criminal defense attorneys and prosecutors are the definitions of “surreptitious” and “reasonable expectation” of privacy.

For example. although the statute protects one right o secretly record one’s conversations, the reality is that with today’s ubiquity of cell phones, even if someone has a cell phone out on the table or is checking a cell phone during the conversation, it may be unclear whether that person is also using the cell phone to record a conversation.

Furthermore, the concept of a “reasonable expectation of privacy” is problematic. Critics say that ultimately this opens the door for a debate about whether one’s expectation of privacy was a reasonable or not.

Lastly, some have criticized the Act for creating a fast track for police to conduct surveillance on citizens private communications without a warrant. The law allows police to get a approval from a local states attorney under a broad set of circumstances as opposed to having to go in front of a judge and show probable cause.

Given these ambiguities in the law, many believe that it will take time and lawsuits in order to clarify some of the boundaries of these issues.