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Instagram’s New Policy: Yes, it does mean what you think.

In Entrepreneurs and Social Media, Social Media, Technology Issues and the Law on December 2012 at 8:43 pm

You do have the rights to your Instagram photos, but you share the rights to your photos.  That means when someone pays Instagram to use your photos, you can’t do anything about it (like litigate.)

There’s been a lot of talk on the web about two issues related to Instagram’s newest policy updates:

The fact is, both are pretty correct.

instaface-facebook-instagram

Yes, the terms are not that different. But what does that mean exactly?

It means that from the get go, Instagram reserved the right to use your photos in the public space.  Those Instagram users that are not private are aware that almost anyone can access their photos, either through the app or the web version.  That’s the idea behind the “open-web” theme propagating by companies like Instagram and Facebook.  Their concern is not user privacy, and to their credit they never pretend that it was their number one priority.  They are focused on bringing you an open platform to be social and create new social ties; if you are concerned about your privacy on social media sites, you can do one of two things: (1) get off the interwebs; or (2) memorize those privacy settings so you know what to do and not do to keep your data safe.   (Yes, we said all of the interwebs, because even Google tracks your searches in order to give you a better user experience).

While Instagram has always reserved the right to use your personal photos in their own advertising campaigns, what’s got everyone in a tizzy is that the new language seems to indicate that Instagram can now sell your photos to third parties.  That’s where it gets interesting.

Instagram, technically, does have a right to “sell” your photos.

We read this great article yesterday in The Verge that said, No Instagram does not have the right to sell your photos – except that it does.  The article pointed out that companies can’t take a picture of you and slap their logo on it because that goes beyond “displaying” the photo into the world of modifying the photo.

But what advertisers can do is pay Instagram to take user photos and display them on their own site or advertising real estate.  This means, if you take a photo of your baby wearing Baby Gap, then Baby Gap can pay Instagram to use your photo and display it on their site.  They can say something like, “Look at the cute babies wearing Baby Gap!”  There are deeper rules as to whether they can modify that photo (which they can’t), but that’s not enough to make parents feel safe about using Instagram to take pictures of their families.

Here’s the biggest issue: people don’t want their personal photos displayed on a company’s site/ad real estate because, well, people don’t like to be used without getting paid and without consent. In addition, many users post pictures of their families to Instagram –  they don’t quite fancy having their 12-year-old’s picture on a company’s advertising.  This isn’t the generation that sees their picture somewhere and thinks, “Oh my God that’s awesome!”  This is the generation that says, “That’s not okay.”  We’ve had clients file complaints with multinationals based on these scenarios.  It’s not good for anyone, really.

So why the outrage?

The most interesting argument we’ve heard is, “Well you are consenting because you signed up for Instagram.”  Yes, that’s true.  Absolutely.  But people are angry because they either have to agree, or they can’t use the service.  That’s because it’s not a free market contract; you cannot call up Instagram and negotiate your own contract terms with them.  It’s boilerplate and that’s that.

And when you take away a real choice, people get upset.  It happens more often than not with web startups – because it’s a tension between how to make money and how to keep users.

What now?

Instagram has come out and try to do damage control.  They are saying that they will not be selling user photos; but until they release an actual policy stating this, it’s still up in the air and the terms stand where they are.

For us – ours is an office divided.  I, as a litigation attorney, am pretty positive I’ll be deleting my Instagram account.  As for our corporate partner that knows all things tech-startup, he says he will be keeping his account.

By:  
 
Benish Shah
Sardar Law Firm LLC
New York, New York
Core Practice Areas:  Fashion/Retail, E-commerce, Commercial Litigation, Art Law, Startup Law, Social Media, Mergers & Acquisitions, and Corporate & General Counsel
 
Sheheryar T. Sardar, Esq.
Sardar Law Firm LLC
New York, New York
Core Practice Areas:  Technology, Corporate & General Counsel, Startup Law, Project Finance, VC/PE, Arbitration/Mediation, Entertainment, and Human Capital

UK LAW REFORMERS URGE SOCIAL MEDIA CLAMPDOWN

In Social Media, Technology Issues and the Law on November 2012 at 5:40 pm

Social media is facing an overhaul of the contempt laws prompted by the rise of Twitter and bloggers.

The Law Commission, the UK government’s law reform watchdog is set to publish a consultation paper yesterday that will outline proposals to reform the common-law offence of contempt and the Contempt of Court Act 1981.

According to The Times it will propose rationalising courts’ powers to tackle contempt so that they are consistent across magistrates’ courts, Crown Courts and Courts of Appeal. This could mean higher fines that include the cost of retrials where comment in Twitter and by bloggers has caused a trial to collapse or be aborted, and powers to detain or bail a person while the court determines an … read the rest of the article here.

For more information on Social Media Law for your business, check out Sardar Law Firm, named the best law firm for Start ups and mid size companies.

3 Key Things for Your Social Media Training

In Entrepreneurs and Social Media, Social Media, Technology Issues and the Law on August 2012 at 11:37 pm

Social media is about interaction, and for growing companies that interaction is critical.  However, both companies and employees make mistakes, whether it be on social media platforms or in some other aspect of their job.  Instead of reacting to that mistake, sometimes (most of the time) it is better to preempt that mistake with a comprehensive social media policy training.  Yes, that’s right – if social media is about interaction, then the policy must have an interactive component too.  Otherwise, how many people do you think really read that 20-30 page, expertly crafted policy book?

Just as we train incoming professionals on how to use the company’s intranet system, it’s time to start training them on social media policies as well.  Here are 3 key things to include in that training:

(1) Pertinent Laws.

It is not enough to say that “employees must abide by all laws and regulations.”  Most individuals entering a new industry have no idea what industry-specific laws may apply to them.  Spend some time hashing out which laws are imperative and directly relate to your industry, and have your social media lawyer lead an interactive training on it.

(2) Personal Social Media Accounts of Employees.

Too often, employees mistakenly make comments on their personal, non-company accounts that can get them fired.  From their personal blog on Islamofacism to their anti equal marriage rant on Twitter.  Many internal human resources departments have felt that these comments on social media platforms can create a “hostile work environment” for co-workers.  This can lead to getting fired.  Because there is a fine line here between freedom of speech and creating a hostile work environment, the training should lay out very clearly what can and cannot get you fired.

(3) Heavily Regulated Industries.

For industries such as finance, law, and medicine, there are a host of laws and regulations that everyone is supposed to know.  Consequently, there are a host of laws and regulations that can be inadvertently violated.  Have your social media lawyer review social media related violations in your industry to lead a social media training with industry-specific examples.  It will help drive the point home faster than that 30 page handbook will.

Interested in setting up a social media training for your company?  Contact: Benish Shah or Sheheryar Sardar at  Sardar Law Firm sardar@sardarlawfirm.com.

For more information on social media law:

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Angel Financing: 4 Things Startups Must Know

In Entrepreneurs and Social Media, Technology Issues and the Law on July 2012 at 8:44 pm
 Angel financing is loosely defined, as it runs the gamut in terms of executions.  We’ve seen angels simply hand a check to a startup; while other angels hire aggressive large law firms with armies of associates working on an angel financing round.

Because the experience with angel financing can vary, it’s important for startups and entrepreneurs to understand some of the basic legalities behind this type of financing.  Below are 4 tips as a starting point.

(1) Understand the Key Business Terms. This is not an option, it’s a necessity in any financing round.  Just because an investor is called an angel does not mean they represent those famed characteristics completely.  For a preferred stock financing (this is most likely to occur when there is an aggressive large law firm behind the angel in a deal) key business terms include:  (1) pre-money valuation; (2) liquidation preference terms; (3) anti-dilution provisions; (4)Board composition; (5) dividend-related issues; (6) vesting imposition on founders’ shares; (7) protective provisions.  Take the time and learn the terms; grab a book or talk to your attorney.  Of course, having a corporate attorney versed in startup financing will be a great help here, but it’s in your best interest to have at least a base knowledge of the business terms.

(2) Push for Convertible Notes. For startups raising less than $800,000, its generally not in the entrepreneur’s best interest to issue equity in terms of preferred stock.  In fact, the entrepreneur is best served by issuing convertible notes, not equity, to angel investors.  First, issuance of preferred stock is costly, complicated and time-intensive.  It involves company valuation and potentially high-dilution for startup founders.  At the initial stages of your company, that’s not what you want.  In contrast, a convertible note would allow the angel to loan the money to the startup, with automatic conversion into equity after the first institutional funding round (Series A).  The convertible note allows the startup to keep their costs low, and defer costly valuation to a larger funding round.  If an angel insists on equity at the outset, push for issuance of common stock – which places the founders and the angel in the same boat – and try to avoid preferred stock.

(3) Never accept terms with personal liability.  It seems common-sense that founders should not be personally liable to angel investors if their company fails (barring fraud of course).  However, it’s a mistake that is commonly made by inexperience startups and entrepreneurs.  There are also inexperienced business attorneys (that don’t work in the startup world) who will request that founders personally take on certain personal liabilities.  Make sure your ready to drop a deal if they are pushing for personal warranties of any kind; and have your owncounsel so they can push back on such terms.  The tip here is simple:  never agree to potential personal liability.  It’s not worth it.  And it tells you something about the angel as well; every sophisticated investor knows that angel investing is high-risk, high-reward.

(4) Due Diligence on the Angel.  The hardest thing to do when someone across the table wants to write you a check that can breath life into your idea is to step back, take a moment and think “why are they handing me this money?”  Themost common mistake entrepreneurs make in these financing deals is the failure to investigate the person(s) offering to give them money.  The angel isn’t just in the picture for the moment of handing over a check; he or she is essentially married to your company for years to come.  Check references, see what else they  have invested in, and talk to those startups as well.  Make an informed decision as to whether this angel is the right type of investor for your company.  You don’t want to end up with an angel who is a controlling jerk with a bad reputation in the investment world; it could have an impact on future investments, and the future of your company.

For more information on startup legal services, email us at sardar@sardarlawfirm.com or join us for a class taught by Benish Shah and Sheheryar Sardar.

Upcoming Classes:

Pitching Your Company: Hands On Workshop (July 25 7:30-9:00) – Register HERE 

What past students have said:

“Great personalized and relevant advice! Made me and my partner see things in a whole new way. ” – Mike Abadi

Fundamentals of a Startup (August 1 & 8 7:30-9:00 pm) - Register HERE

What past students have said about this class:

Benish and Sheheryar provided many useful insights about the startup world and launching a company. I thought I knew the best way to launch before the class, but they helped fill in the gaps in my knowledge about forming a corporation, raising capital, and other various legal considerations. Highly recommended.” – Chris Macke 

“This is a great class to understand the basics of how to establish and grow a startup from the legal/investment perspectiveBenish and Sheheryar are both passionate about the startup world and are able to provide an angle that most entrepreneurs would not naturally consider.” – Ashek Ahmed

Great breakdown of legal advice for a startup- the information was personalized, relatable and clearly presented. My partner and I expected to walk away confused, but we left knowing the right moves for our business.” – Sisi Recht

 

via Angel Financing: 4 Things Startups Must Know on Corporate Counsel NY

VC Financing for Startups: Understanding Cost Drivers

In Entrepreneurs and Social Media, Technology Issues and the Law on July 2012 at 4:09 pm

There has been a lot of debate on the legal costs associated with financing rounds for startups.  Fred Wilson’s challenge to startup lawyers called for legal costs to be reduced to $5,000.00 for a seed financing round.   The issue, brought up by many lawyers is this: (1) large firms are not going to drop their rates from $17k+ to $5k because their costs are too high based on the army of associates working on each piece of the matter; (2) startup focused firms aren’t well known enough to VCs but they could get the work done in between $5K-$10k because they are lean and understand the startup world because they themselves are startups.

To understand what drives legal fees (aside from an army of associates) during a financing round, it’s important for startups, especially those going through their first few rounds, to understand why a transaction costs more than a few hundred dollars.  It’s also important to understand why choosing a firm that’s a good fit for a startup matters in these rounds.

Leveraging Knowledge 

Few things can hurt a startup more than a vague or hurried term sheet that will result in increased costs down the road.  To avoid these problems, smart entrepreneurs and investors involve counsel early on in the term sheet process to make it as smooth as possible.  For entrepreneurs, they need to understand that aVC’s counsel is not the startup’s counsel and that they absolutely need their own counsel as well. It’s like buying an insurance policy that will cost your startup much less than potential future problems stemming from vague term sheets.

Involving attorneys from the get go also allows lawyers to provide increased value-add through market knowledgeentrepreneurs and investors can leverage that knowledge and experience for their own benefit.  For startups, they can also discuss with their lawyers what is “normal” or “market-value” and what safeguards they should be pushing for, and what they can be more lenient on.  Lawyers have a knack for seeing what can cause a potentially massive lawsuit down the road, but clients need to involve them early on to leverage such knowledge.

Understanding Due Diligence

In most funding rounds, costs start increasing due to due diligence required by investors before a deal is closed.  This means due diligence on the following (if not more) subjects:

(1) Litigation Diligence:  Investors want to ensure that there are no pending or threatened suits against the startup that could materially reduce its value  (they cannot just take your word on this).

(2) Tax and Liability Diligence: Investors need assurance that the startup is up to date on all taxes and potential obligations.

(3) IP Diligence:  The assurance that each IP the startup claims as its own really belongs to the startup and not anyone else. This also includes review of whether there are any open source or similar issues, that all former/current employees/consultants/contractors/founders have legally and properly assigned rights to any IP to the startup, and if reverse vesting of common stock held by key employees is necessary.

(4) Employee Diligence: Ensuring that employees/contractors/consultants/founders have signed properly drafted non-compete, non-disclosure and non-solicitation agreements.  Also ensuring thatemployees & contractors are properly classified to avoid potential liabilities.  

(5) Corporate Governance Diligence:  Investors want to ensure that theentity is properly formed and corporate governance matters have been properly followed (i.e. startup’s corporate records must be in order; if they are not, lawyers and the startup must go into overdrive conducting a “cleanup” to ensure that everything is up to date, properly documented, and ready for inspection – this can add significant costs and often can be delay, or kill, a deal closing).

(6) Stock Option Diligence: Legal diligence to ensure that all stock option grants were properly approved and 409A compliant; this may also result in a change to the price per share if contemplated on a “pre-money valuation” basis.

(There are more aspects that can drive up the costs, but those listed above can be some of the most time-consuming).

Setting a Cap

Anytime a startup (or an investor) hires counsel, they should ask for a cap on the legal fees; SLF works to ensure that in closing deals such as early financing rounds, our legal bill comes under the cap, however other firms have been known to bill at the cap regardless of complexity or simplicity of the deal.

If an attorney or firm does not want to talk in terms of a cap on the legal fee, it may be prudent to search around a little more.

For more information on startup legal services, email us at sardar@sardarlawfirm.com or join us for a class taught by Benish Shah and Sheheryar Sardar.

Originally published in Corporate Counsel NY (republished with permission)

Are Twitter Followers a “Client List” – and Who Owns the Account?

In Social Media on July 2012 at 5:55 pm

When you start tweeting as part of your corporate position, the lines between what is a personal Twitter account and one made for business purposes is blurred – especially in the world of startups, new ventures, and media companies.  What happens when you leave the company?  Who has ownership rights over the Twitter account - the company, or the employee?

Recently, PhoneDog Media LLC sued former employee Noah Kravitz over exactly this.  Noah Kravitz, while employed by PhoneDog, tweeted under the name “Phonedog_Noah” and upon his departure from the company, Kravitz was allegedly given the rights to keep the Twitter account in exchange for occasional tweets about PhoneDog.  However, Kravitz switched his Twitter handle from “PhoneDog_Noah” to “NoahKravitz” while keep the followers and the good will from the initial Twitter handle.

Under the new Twitter handle, Kravitz increased his Twitter followers from 17,000 to 20,000.  Eight months later, PhoneDog sued Kravitz claiming that those Twitter followers were in fact a proprietary client list, claiming damages of $2.50 per month, per follower – totaling to about $340,000.00 USD.

The question, of course, is whether Twitter followers are in fact proprietary or if they can be considered company property.  This leads to the question: who owns a Twitter account?

Many businesses utilize social media to increase brand awareness, and many employees – especially rainmakers – utilize their personal Twitter accounts to help generate business for their employer.  Since Twitter is not a paid service, the lines are blurred as to who owns the account, especially when the Tweets are related to building business in some manner.

Regardless of the outcome of this case, companies should take steps to develop a written Twitter use policy, establishing the use of Twitter handles for company use.

A few questions employers should pose internally regarding Twitter use:

(1)  If an employee tweets during the work day as part of his/her job description, is that Twitter handle now owned by the company?

(2) Was the Twitter handle created by the employee before joining the company, or after joining the company, and for what purpose?

(3) Were any company resources spent/utilized in the creation and/or use of the Twitter handle?

(4) Can employers restrict/monitor what the employee Tweets about?

(5) Was this a personal Twitter handle that the employee was using for business purposes at the request of the company – and if so, how much of that really “belongs” to the company as opposed to the employee?

(6) Is this something that should discussed and incorporated into an agreement at the outset, or upon the separation of the employee from the company?

For employees, the question comes down to this: how to ensure that their Twitter handle is separate from their employment.  Many journalists face this problem, as they do list in their Twitter accounts where they work, and they also post articles they have written.  While their accounts are personal, there is a clear business crossover.  For some, they put a clear disclaimer in their profile that this is not a company account and is personal; for others, the lines are blurred.  It remains to be seen how and if a disclaimer would be valid in these situations.

The main thing to try and avoid is a “he-said-she-said” battle in the court systems; from both the employer and employee sides.

Originally published in Corporate Counsel NY.

by: Sheheryar Sardar, Esq. & Benish Shah, Esq.Sardar Law Firm LLC

For more information on social media law, contact: Sardar Law Firm at sardar@sardarlawfirm.com.

Follow Sardar Law Firm on Twitter @CorpCounselNYC

Follow Social Media Legal Twitter @socialmedia_law 

Personal Liability of Corporate Shareholders

In Entrepreneurs and Social Media on July 2012 at 6:42 pm
 Originally published in Corporate Counsel NY.

It’s a little known fact (especially in the startup world) that New York privately held corporations can hold the top 10 shareholders of such corporations personally liable for any unpaid compensation to the corporation’s employees.

The reason for this is that incorporation does not offer absolute protection to the business owners; otherwise the situation would be one of the wild wild west, and the legal profession does not look too fondly on that.  There are sound exceptions to the protections of incorporations, and one of them is that 10 of the largest shareholders of a privately held corporation may be held personally liable for unpaid compensation.

Main Points

Here are 5 key things to note about this exception (found in Section 630(a) of New York Business Corporation Law):

(1) Corporations only.  The law applies only to privately held corporations; this does not include LLCs or investment companies.

(2) All compensation.  Wages and all other types of monetary compensation are within the purview of this exception, including, but not limited to: severance pay, pension or annuity funds, vacation pay, overtime, and/or contributions to insurance or welfare benefits.

(3) Employees, not contractors.  Only employees are covered, notindependent contractors (there is a critical distinction here, see also: Employee Misclassification Can Cost You).

(4) Joint and several liability.  There is joint and several liability amongst the shareholders, allowing the employees to go after only one of the shareholders (likely with the deepest pockets) for the whole amount owed.  The shareholder then can seek pro rata contributions from the other largest shareholders.  

(5) Strict procedure.  Employees need to first attempt to recover unpaid compensation from the corporation; if the judgment remains unsatisfied, then they move towards the shareholders. (There is a procedure that employees must follow, including a written notice under Section 630(a)).

Escape Clause?

This rule applies only to companies that were… click HERE for the remainder of the article.

By:  Benish Shah
Sardar Law Firm LLC
New York, New York
Core Practice Areas:  Fashion/Retail, E-commerce, Commercial Litigation, Art Law, Startup Law, Social Media, Mergers & Acquisitions, and Corporate & General Counsel
Contact us at bshah [at] sardarlawfirm [.] com

5 Issues for Employers re Social Media – Infographic

In Entrepreneurs and Social Media, Social Media, Technology Issues and the Law on June 2012 at 3:04 pm
We’ve been discussing this since Feb 2010, but were told that SLF was a little ahead of the times on this matter.  Now, the employers-employees-and-social-media issue is lighting up, and for some reason employers are either over-reaching or not reaching at all.  (See: Employers Asking for Facebook Passwords Could be Violating Federal Law (Really)Assess, Influence, & EvolveEmbrace Social Media, But Minimize the Risks).
So we’ve worked out a infographic that may help employers identify the key issues regarding social media in the workplace.  Enjoy!

Louisiana law extends sex offender notice to social media

In Social Media, Technology Issues and the Law on June 2012 at 2:16 pm

Fist Louisiana tried to ban sex offenders and child predators  from ever using the internet, but a federal judge struck that law down as unconstitutional.  Now, State Rep. Jeff Thompson backed a new law requiring sex offenders to state their criminal convictions on their social networking pages.

The law goes into effect in August 2012 and also requires sex offenders to disclose their address and describe their physical characteristics on social networking sites.  Per Rep. Thompson, is the first of its kind.

Rep. Thompson believes that this law is not unconstitutional because it stays within already existing notice parameters for sex offenders.

by: Sheheryar Sardar, Esq. & Benish Shah, Esq.Sardar Law Firm LLC

For more information on social media law, contact: Sardar Law Firm at sardar@sardarlawfirm.com.

Follow Sardar Law Firm on Twitter @CorpCounselNYC

Follow Social Media Legal Twitter @socialmedia_law 

Netflix’s Facebook app could be illegal – Maybe.

In Social Media, Technology Issues and the Law on March 2012 at 12:26 pm

Netflix’s Facebook app is up and running in all 46 countries where it offers service — all except America.  Because of a law referring to “prerecorded video cassette tapes or similar audio visual materials.”

The video streaming service is blocked from creating a Facebook app in America because of a 1980s law.  The law, Video Privacy Protection Act (VPPA), is meant to protect consumers’ privacy, and lawmakers are currently dealing with how to update it, but as of now it creates a difficult obstacle for video streaming companies like Netflix.

Oddly, the VPPA has no bearing in current times, as it arose during the  failed Supreme Court nomination of Robert Bork.  In 1987, while Bork’s nomination hearings were taking place, , a freelance writer for the Washington City Paper,  Michael Dolan, talked a video store clerk into giving him Bork’s rental history.  The city paper published the list – and Congress got upset and passed the VPPA.  The law prohibits “a video tape service provider” from disclosing its customers’ “personally identifiable information,” without written consent from the consumer.

While the VPPA may be focused on the VHS world, Netflix said the vague language leaves the present-day situation unclear. Steve Swasey of Netflix said they’d rather be in compliance than have a problem on their hands under VPPA.  Netflix is not a VPPA novice.  The company disclosed that it paid $9 million to settle a 2011 lawsuit by customers who alleged that Netflix didn’t delete their personal account data after one year (another VPPA provision).

Hulu, on the other hand, has developed a go-around to VPPA.  They allow users of their Facebook app to opt-in or opt-out of sharing their viewing history.  It’s unclear as to exactly why Hulu can have an app and Netflix can’t, though it is arguable that the difference lies in the fact that Hulu does not have a hard product (DVDs, etc.) while Netflix does.  Could that be the defining factor under VPPA?  Since streaming did not exist in the 80s, it may come down to the spirit of the law – until an updated law takes its place.

 

by: Sheheryar Sardar, Esq. & Benish Shah, Esq.Sardar Law Firm LLC

For more information on social media law, contact: Sardar Law Firm at sardar@sardarlawfirm.com.

Follow Sardar Law Firm on Twitter @sardarlawfirm

Follow Social Media Legal Twitter @socialmedia_law 

 

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