Recent Court Decisions Provide Some Clarity in Ever-changing Techlaw Landscape

As every CIO knows, today all business is digital business.  From the corner mom and pop bodega using Square to process credit cards up to Cisco Systems global network of devices supporting Zetabytes of data over an increasing number of devices.

What began as largely static website e-commerce at the turn of the millennium is now every day operations across multiple devices and the many different brands of platform and content delivery network.  In case you missed it, two recent cases will have a wide impact regardless of industry period

Law Enforcement Access To Cell Phone Location Data Requires Warrant

In the case of Carpenter v. United States, the Supreme Court ruled that law enforcement must obtain a warrant to have access to location and other data contained on a suspect’s cell phone.  In case you’re not familiar with the case, the facts in the Carpenter case are worth mentioning. In 2011, the government, conducting a criminal investigation in Detroit, obtained months’ worth of time-stamped records known as cell-site location information (CSLI) for suspects.  Wireless carriers produced CSLI for petitioner Timothy Carpenter’s phone, and the Government was able to obtain 12,898 location points cataloging Carpenter’s movements over 127 days—an average of 101 data points per day.  Carpenter moved to suppress the data, arguing that the Government’s seizure of the records without obtaining a warrant supported by probable cause violated the Fourth Amendment.  The District Court denied the motion, and prosecutors used the records at trial.  Carpenter was convicted, based in part on the cell-site records, and he appealed. holding that the government’s acquisition of historic cell-site location information (HCSLI) – at least to the extent it includes 7 days or more of cell-site records – was a search and thereby required a warrant.

In reversing the conviction, a majority of the Court has recognized that individuals have a reasonable expectation of privacy in the whole of their physical movements and a warrant is required only in the rare case where the suspect has a legitimate privacy interest in records held by a third party.  The Court downplayed the significance of its ruling, calling its decision “a narrow one” that “does not express views on “real-time CSLI” or question the application to … a range of other information-gathering tools, such as security cameras.”

What this means for business.  While pundits are wisely praising the decision as a victory for privacy, I for one, do not believe it applies that broadly. Even so, there is a tangible benefit for corporate counsel at technology companies, especially those that maintain location information about their customers. Lawyers and compliance pros will feel some relief knowing that they do not have to scramble, prevaricate or litigate with law enforcement when a company receives a subpoena or other demand for location data without a warrant attached.

For additional views on this decision, please see an article from the International Association of Privacy Professionals here, and another from the Electronic Frontier Foundation here.

States Can Now Require That Internet Retailers Collect Sales Tax

The other notable decision to come down from the Supreme Court involves the long-simmering issue of state taxation on internet sales.

The decision, in South Dakota v. Wayfair Inc., was a victory for brick-and-mortar businesses that have long complained they are put at a disadvantage by having to charge sales taxes while many online competitors do not. And it was also a victory for states that have said that they are missing out on tens of billions of dollars in annual revenue.

The South Dakota Legislature enacted a law requiring out-of-state sellers to collect and remit sales tax “as if the seller had a physical presence in the State” to address the erosion of its sales tax base causing a corresponding loss of critical funding for state and local services (“Act”).  The Act covers only sellers that, on an annual basis, deliver more than $100,000 of goods or services into the State or engage in 200 or more separate transactions for the delivery of goods or services into the State.  Top online retailers with no employees or real estate in South Dakota who met the Act’s minimum sales or transactions requirement, but do not collect the State’s sales tax opposed the Act. South Dakota filed suit in state court, seeking a declaration that the Act’s requirements are valid and applicable to respondents and an injunction requiring respondents to register for licenses to collect and remit the sales tax. At trial and on appeal, courts held that the Act is unconstitutional.

The ruling effectively overturned a system that it created.  In 1992, the Supreme Court held that the Constitution bars states from requiring businesses to collect sales tax unless they have a substantial connection to the state. That case was Quill Corporation v. North Dakota.  The Quill decision helped pave the way for the growth of online retail by letting companies sell nationwide without navigating the complex patchwork of state and local tax codes.

South Dakota’s attorney general, called the ruling “a big win for South Dakota and Main Streets across America.”  The case should benefit both rural businesses where local businesses have been hit hard by competition from online retailers and municipal coffers as well, because in some states local sales taxes are collected at the state level.  Owners of brick-and-mortar stores like the decision as a means of leveling the playing field because they feel they often missed out on sales of big-ticket items since sales tax could have had an amplified effect on the price.  For consumers, this could mean paying more for products bought online.  Although most have a “use tax” that works like a state sales tax for online purchases, few if any consumers actually pay it.

Since the beginning of my practice in 1999, I suggested businesses take a state-by-state approach when it comes to issues like sales tax, since it can vary widely by jurisdiction.  No business is entirely virtual. All businesses will need to examine their ecommerce strategy to see whether and to what extent this case affects the business model.

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David Adler continues focus on Cyber Security Conferences

Soem prior conferences:

Data at Risk: Regulatory and Privacy Concerns in a Data Breach. – Enfuse Conference 2018, Las Vegas, NV, May 23, 2018.

Trends in Cyber-Law 2017– ISACA CSX North America 2017, Washington, DC October 2-4, 2017

The Human Side of IT Acquisitions– Assoc. of Technology Acquisition Professionals CAUCUS IT Procurement Summit, New Orleans, LA, November 7-8, 2017

My topic, Assessing and Responding to Cyber Legal Risk,was chosen for presentation at the 2018 New York State Cyber Security Conference. 

#nyscyber 

David Adler takes center stage in Washington D.C. at ISACA #CSXNA 2017

Trends in Cyber Law
ISACA CSXNA 2017 CYBER LAW

Adler’s topic was Trends in Cyber-Law 2017.

Cyber-Law “governs the digital dissemination of both (digitalized) information and software and legal aspects of information technology more broadly, including information security and electronic commerce. Cyber law  is a term that encapsulates the legal issues related to use of the Internet. It is less a distinct field of law than intellectual property or contract law, as it is a domain covering many areas of law and regulation, such as internet access and usage, privacy, freedom of expression, and jurisdiction.”

Despite the variety of subjects, most legal trends for 2017 are in 5 key areas: Data Sovereignty, Cyber Conflict, Civil Liberties, IoT and Cloud.

The full presentation slide deck is available here.

CSX2017 Trends in Cyberlaw 2017 Adler (Read-Only)

Intellectual Property rights (copyright, patent, trademark, trade secrets) and information technology systems each play a crucial role in business competitiveness. In order to realize the full potential of a company’s intangible business assets, it is necessary to be able to identify, locate and safeguard their disclosure and use. Cyber Security plays a crucial role in managing these internal and external business and legal risks. This “Hot Topics” discussion is a snapshot of developments in law, policy, regulation and court cases focusing on privacy and civil liberties, identity, cyber-conflict, IoT, standards, corporate structuring and the international technology marketplace.

This session covered:

  • Understanding how developments in smart home devices are creating new cyber security challenges
  • Learning how changes in regulatory agency policies and personnel are creating new privacy risks and opportunities
  • Identifying new legal cases affecting business operations
  • Recognizing new business and legal risks in relationships with customers and vendors and how to implement changes to mitigate such risks

For more information contact us here:

www.adler-law.com (866) 734-2568

TRENDS IN DIGITAL MARKETING

Digital Healthcare Continues to Evolve

Widespread distribution of digital communications technology (phone, tablets, ultra-portable laptops, gaming devices) has changed the nature of marketing. However, medical practices and other healthcare providers are reluctant to use digital marketing techniques. While most industries move away from the distribution of massive, shotgun-style email and snail-mail campaigns and toward targeted, social media and demographic-driven efforts healthcare marketing is falling behind.

Digital marketing execs face many challenges getting the message and media mix right. Early adopters provide a look into the changing nature of marketing. From a pragmatic perspective, there are barriers to entry for digital healthcare marketing efforts (privacy, regulatory), the growing use of content marketing (native, branded), social marketing, and electronic marketing strategies (email marketing, online scheduling, etc.) in the healthcare field and customer-oriented services that can be a strategic use of the Internet for marketing to providers, patients and third-party service providers.

The evolution of healthcare marketing toward greater use of “native,” sharable and relevant content provides both obstacles and opportunities in acquisition and use of third-party media content.

Use of content marketing is increasing.

On average, 35% of all marketers use print magazines, but 47% of healthcare marketers use them. In print, 28% of marketers use print newsletters compared to 43% of healthcare marketers, and 26% of marketers use print for annual reporting compared to 36% in healthcare. When it comes to using blogs, 74% of all marketers use blogs compared to only 58% in the healthcare industry. The situation is similar for social networks, with an interesting exception – 71% of healthcare marketers make use of YouTube, more than the average of 63%. This is likely because healthcare professionals use YouTube to televise procedures and interview doctors.

By now marketers should be accustomed to using their own creative content. However, focusing on owned assets like a website and email won’t move the needle enough to impact the bottom line. As a result, healthcare marketers are integrating new content (in the form or “advertorials” or “native” content). This in turn is developed alongside a long-term SEO strategy.

Native advertising distributes “sponsored” content on relevant pages, delivering relevant content to the right audience in a way that is non-intrusive and integrates with the user experience.

Native Content often involves use of product/service reviews and endorsements. It is important to include proper disclosures when using native content. The FTC will initiate enforcement actions against marketers that deceive consumers.

In the Matter of Son Le and Bao Le, the FTC charged that the two brothers deceived consumers by directing them to review websites that claimed to be independent but were not, and by failing to disclose that one of the brothers posted online product endorsements without disclosing his financial interest in the sale of the products.

Top 5 questions asked by entrepreneurs

Over the last 20 years I have worked with many technology companies and entrepreneurs in the Chicagoland area. For a time, I also ran the start up and entrepreneurial ventures subcommittee of the Chicago Bar Association.

The entrepreneur panels are always the best attended and also seem to have the liveliest discussions.

Drawing on those experience is it, here are five of the most common questions asked by entrepreneurs.
  1. What is the best legal structure for my business?
  2. How do I protect my idea?
  3. What kind of contracts do I need?
  4. Should I use employees or independent contractors?
  5. Who else should be on my professional team?

Ordinarily one would tackle these in order. However, because the answer to #2 will inform the discussion around #1, it makes sense to address this first.

Adler Quoted in BNA’s Electronic Commerce & Law Report

A recent article by Alexis Kramer, Legal Editor for Bloomberg BNA’s Electronic Commerce & Law Report, examines the nature of social media platform messenger applications and the move into e-commerce. This shift raises the implications for policing counterfeit goods and enforcement of online purchases.

The article entitled “E-Commerce May Come to Messaging Apps; Watch for Counterfeits and Contract Issues” highlights that “[b]uying and selling goods through messenger apps” … “is definitely the future of mobile.”

David M. Adler was interviewed for the article for insight around ecommerce legal issues, which include intellectual property and contractual issues, that arise when consumers transact business through messenger apps. Many of these issues were identified in his article Pinterest “Buyable Pins” And Ecommerce Liability.

The legal risks and issues vary widely depending on industry and product/service mix and encompass many interrelated areas of the law. Specifically, Adler inditified five main areas of concern for ecommerce, especially on mobile devices and/or through messenger apps:

  1. Trade & Commerce Issues (Brand protections)
  2. Online Agreements (limitations of liability)
  3. Intellectual Property Issues (content ownership and use)
  4. Privacy & Security (data gathering, usage, storage & sharing)
  5. Human Resources & Employment Issues (reputation and social media use)

Facebook, WeChat, Instagram, Snapchat, Twitter and other social networks already allow users to send payments to one another through private messages. New tools such as the Pinterest “Buy Now” pin, and Twitter’s direct messages, facilitate commercial transactions with consumers.

As the article notes “enabling retail transactions via chat” opens the door for more counterfeit goods, difficulty monitoring the sales channel, increasing difficultly of enforcing online purchase terms, and lack of visual space to properly notify customers of the terms and conditions.

‘‘All the issues you would have when conducting transactions over the Internet are magnified when you’re using a messenger app,’’ David Adler, principal of Adler Law Group in Chicago, said.

Tracking Tech Case Provides Guidance on Customer Opt Outs

From healthcare apps, to mobile devices, to utilities, services are collecting and aggregating customer data across many different types of connected devices. Many mobile apps and services rely on a consumer’s location information. As more mobile apps connect to the Internet to send and receive location data, the FTC, legislators, privacy advocates, and others have identified location information as a particularly sensitive category of data. A recent study conducted by Carnegie Mellon University contained shocking revelations about the frequency with which location information is gathered and transmitted to companies through their mobile apps. At the same time, the recent settlement with in-store retail customer tracking provider Nomi highlights the FTC’s increased scrutiny of data gathering practices and disclosures of mobile application developers.

It is no secret that retailers could derive significant business intelligence from the real-time moments through stores. This is one of the areas around which companies innovate around customers’ private information. For example, Nomi Technologies, a company whose technology allows retailers to track consumers’ movements through their stores, made headlines when it agreed to settle Federal Trade Commission charges that it misled consumers about opting out of their tracking services. This is not why you want to have your company’s innovations in the news.

Business counsel both inside and outside of companies developing applications that leverage mobile geolocation data of consumers and employees should be aware of the many issues that are developing around this area such as: How is geolocation information gathered and how does data flow from device, to app to, third party? How is it shared and used in mobile advertising? When is consent required and how should stakeholders obtain such consent?