April 12, 2017
Authored by Scott Hall
On March 15, 2017, Senator Edward Markey (D-Mass.) and Representative Peter Welch (D-Vt.) introduced federal legislation entitled the Drone Privacy and Transparency Act of 2017.1 The proposed legislation seeks to address growing concerns regarding personal privacy violations anticipated by (or, perhaps, already resulting from) the continuing increase of unmanned aircraft systems ("UAS" or "drones") in the nation's skies. To that end, the proposed legislation would require every person or entity seeking to use a drone for commercial purposes to provide certain information about where, when, and for what purposes the drone will be flown, and whether it will collect, sell, or otherwise use personal information about any individuals. The legislation would also require the FAA to publicly disclose this information on the Internet. Additionally, the legislation would ban any use of drones by law enforcement personnel without a warrant.
The proposed legislation purports to be a necessary response to the threat of "invasive and pervasive" drone surveillance that is predicted to occur as commercial drone use in the U.S. continues to expand.2 However, while certain privacy concerns based on the ever-increasing use and rapidly evolving technological capabilities of drones may be warranted, the proposed legislation appears to be both underinclusive and overbroad in its attempt to address potential violations of personal privacy. For example, if enacted, the bill would impose additional pre-authorization requirements on anyone seeking approval to operate a drone, and would also require public disclosure of the time and location of planned drone operations, as well as details regarding the specific technical capabilities of the drone – regardless of the drone's actual or intended operation. But, the bill does not specifically prohibit any particular type of drone operation or method of data collection as long as the required pre-authorization and disclosure requirements have been satisfied. Moreover, the bill explicitly does not apply to "model aircraft" (i.e., drones flown for hobby purposes), which are generally understood to be outside the Federal Aviation Administration's scope of authority. Yet, hobby drones are just as capable of violating personal privacy as drones used for commercial purposes. In fact, hobby drones are frequently involved in national news stories regarding privacy violations (such as drones hovering near bedroom windows or over backyard pools), and have likely contributed more to the current public sentiment of fear and distrust underlying the proposed legislation than commercial drones.
Additionally, the proposed legislation would have the federal government wade into – and most likely preempt – areas of law typically left to the states, such as privacy, trespass, and state and local police power. In recent years, many states and localities have enacted drone-specific laws aimed at protecting privacy. Several states have also passed laws regulating law enforcement use of drones. The proposed federal legislation would likely preempt many of these state and local laws. Therefore, before granting such broad federal power over drone regulation, more thought should be given to whether, and in what contexts, states are better suited to decide what drone operations should or should not be permitted in their jurisdiction and how their local law enforcement agencies should be permitted to conduct their work (within constitutional limits). Indeed, given that hobby drones are generally not subject to FAA regulation, state drone legislation has become increasingly important. Thus, the potential preemption of state laws that may occur as a result of vesting the federal government with broad authority over issues like privacy and state police power may impair the ability of state and local governments to effectively address drone concerns specific to their locale.
In light of the many valuable current and anticipated applications of drone technology – which the bill explicitly recognizes – the preferred course of action may be to avoid forcing a federal "one-size-fits-all" privacy law on drones. Rather, it may be better for the federal government to continue to work cooperatively with states to define respective areas of state and federal responsibility over drones and to target particularized unlawful or undesirable conduct for specific regulation, while avoiding imposing more burdensome pre-authorization requirements on all drone operators, which could discourage or inhibit beneficial drone use and innovation.
I. The Proposed Legislation
The Drone Privacy And Transparency Act proposes three main methods to safeguard personal privacy threatened by drones: (1) required pre-authorization information statements about the intended use of the drone, including potential data collection and use; (2) public disclosure of information relating to the ownership, operation and capabilities of each drone authorized to operate in the national airspace; and (3) prohibition on law enforcement use of drones without a warrant, as well as required statements and policies to minimize collection of data outside the necessary scope of an investigation or warrant.
A. Pre-Authorization Data Collection Statements
First, the bill proposes to implement additional procedures for anyone seeking authorization to operate a drone for non-hobby use. Specifically, the bill would prohibit the FAA from approving, issuing or awarding any license, certificate or other grant of authority to operate a drone in the national airspace unless the person seeking such authorization or approval provides a "data collection statement" detailing, among other things: (1) the identity of individuals or entities that will use the drone, (2) the specific locations and time period in which the drone will operate, and (3) what types of information or data about individuals or groups will be collected by the drone, including (a) how such data will be used or sold, (b) how information unrelated to the specified use will be minimized, (c) how long any such data will be retained, and (d) how such data will be destroyed. The data collection statement must also identify the possible impact of the drone on individual privacy, the specific steps that will be taken to mitigate any such impact, and contact information for reporting complaints and/or requesting information related to the collection of personally identifiable data. The bill would allow individuals whose data has been collected to request and obtain such data, as well as to challenge the accuracy of that data and/or challenge the denial of access to the data.3
B. Public Disclosure Of Authorized Drone Operations
Second, the bill seeks to promote transparency of drone data collection by requiring the FAA to make publicly available, on the Internet, the names and contact information for each owner and operator of an authorized drone, the tail/identification number for each authorized drone, a description of the technical capabilities of each authorized drone (including cameras, thermal imaging, mobile phone interception, facial recognition, license plate reader, etc.), information detailing where, when and for what purpose each authorized drone will be operated, and the applicable data collection statement, data minimization statement, and applicable license, approval or grant of authority for each authorized drone. The bill would also require public disclosure of any data security breach with respect to information collected by a drone.
C. Restrictions On Law Enforcement Use Of Drones
Third, the bill seeks to address concerns over law enforcement use of drones by prohibiting a governmental entity (including any federal or state agency) from using drones for law enforcement or intelligence purposes without a warrant. Moreover, the bill would prohibit the FAA from authorizing any drone operation by a law enforcement agency (or its contractor or subcontractor) unless the agency submits a "data minimization statement." The data minimization statement must detail the specific policies adopted by that agency to minimize the collection by a drone of information that is unrelated to the investigation of a crime under a warrant, as well as to require the destruction of information no longer relevant to such an investigation or an ongoing criminal proceeding. The bill would also require law enforcement agencies to describe their audit and oversight procedures with respect to ensuring that the agency's drone operation is compliant with the submitted data collection statement and data minimization statement.
II. Balancing Privacy Rights Against The Benefits Of Drone
The proposed legislation purports to apply to every person or entity that currently uses, or that seeks to use, drones for any non-hobby purpose. Thus, the effects of the legislation would be significant given the substantial increase in the use of drones by businesses across numerous industries over the past few years. Of course, because of the variety of technology that can be employed by drones to conduct surveillance, including cameras for photographs or video recording, thermal imaging, GPS trackers, license-plate readers, facial recognition software and more, public concern over potential violations of privacy and misuse of personal information is certainly valid. However, careful consideration is warranted before passing the proposed legislation given that its actual application is likely to have far-reaching effects that go beyond merely protecting privacy to potentially stifling desirable drone operation and innovation.
In fact, the bill's prohibition on any license, approval or other authorization to operate a drone absent compliance with the required data collection statement constitutes a sharp departure from the FAA's recent direction of reducing regulatory hurdles to drone operation. Just last summer, for example, the FAA adopted uniform rules for the operation of small drones (14 C.F.R. Part 107), which allow for the operation of drones for commercial or non-hobby purposes without a specific certificate of authorization or waiver from the FAA, as long as drone operators abide by certain rules and restrictions, including operating only during daylight hours, abiding by certain speed and weight limits, and having an operator with a remote pilot certificate. This recent relaxing of formal regulatory approval for commercial drone operation has been widely applauded by the drone industry. The proposed privacy legislation may therefore be seen as a step backwards for the industry, which, despite recent progress, still suffers from heavy regulation and uncertainty. Indeed, many blame the current regulatory restrictions on drones as the reason many drone companies have chosen to conduct research or operations in foreign countries that do not have such restrictions.4 Thus, while privacy concerns relating to drones need to be addressed, the proposed legislation's focus on pre-authorization procedures and public disclosures, rather than specific misconduct, may adversely impact drone operations that raise no serious privacy concerns.
III. Balancing Federal And State Responsibility Over Drones
The proposed legislation would also raise new preemption issues and fresh ambiguity about the proper role of state and local governments in regulating drones. Indeed, the bill is in direct conflict with statements currently maintained on the FAA's website regarding the proper role of state and local regulation of drones, which identify privacy and law enforcement operations, among other issues, as generally not being subject to federal regulation.5 Consistent with this position, the small drone rules adopted by the FAA last summer explicitly avoided privacy issues and warned drone operators that "state and local authorities may enact privacy-related laws specific to UAS operations."6 To the extent the proposed legislation is viewed as a decision by Congress to legislate privacy issues for drones at the federal level, this departure from the previous federal-state division of authority could have wide-ranging impacts, particularly given that many states have already passed laws regulating various aspects of drone operation.
Although states differ in their approaches to privacy protection, several states have recently passed or revised laws to protect personal privacy against drone misuse. Some states, for example, have passed laws prohibiting the use of drones to commit voyeurism, stalking, or other surveillance in violation of an individual's reasonable expectation of privacy. Other states, including California, have attempted to protect privacy by prohibiting, as trespass, the capture of images, sounds, or other data of a personal nature by drones over private property. Still other states prohibit surveillance or capture of images or data in specific locations, such as schools, prisons, or at public events. At least one state (Oklahoma) has even recently proposed legislation that would permit property owners to shoot down or otherwise destroy drones flying over their property or "where a reasonable expectation of privacy exists." Thus, although there is still much work to be done to ensure a comprehensive legal framework sufficient to safeguard personal privacy against all potential drone intrusions, this area appears to be one in which states are actively involved and uniquely positioned to address the specific concerns and needs of their locale. It is therefore questionable whether a broad, federal privacy law that might preempt such state and local laws is the preferred course of action.
Additionally, many states have already passed laws regulating the use of drones by law enforcement personnel. The proposed legislation, however, purports to apply to all federal and state law enforcement agencies and imposes a blanket prohibition on any drone use not authorized by a warrant. While it makes sense to require a warrant to use certain drone technology, such as thermal imaging, facial recognition software, or GPS tracking, there is less justification for prohibiting use of drones by law enforcement personnel for simple aerial monitoring or the capture of images or video available to any member of the public. In fact, the U.S. Supreme Court has specifically held that any place that could theoretically be viewed by a member of the public, including from an aircraft, can also be observed by a government agency without constituting a violation of the Fourth Amendment.7 Of course, the Court left open the question of when any specific instance of observation might constitute a violation of privacy, but suggested that it should be addressed on a case by case basis, as opposed to the uniform ban contemplated by the proposed legislation. To be sure, misuse of drones by law enforcement is certainly cause for concern. But state and local governments have typically been given authority to regulate their own police power within constitutional limits, and nothing suggests that this should change merely because the methods of surveillance continue to change.
IV. Protecting Against Privacy Violations By Hobby Drones
Notably, the proposed legislation explicitly does not apply to "model aircraft," which includes small drones that are flown strictly for hobby or recreation purposes, as opposed to commercial use. Thus, although the legislation would monitor and disclose the collection, sale or other commercial use of personal information by drone operators, it does not cover activity such as stalking, voyeurism, or other surveillance in which drone operators collect private images, video, or other data for their own personal use. While large-scale collection and commercial exploitation of personal data is certainly one type of privacy harm that could be committed by drones, the instances of drones "peeping" in bedroom windows, hovering over swimming pools, or personally stalking or harassing individuals also constitute serious privacy concerns that are more likely to be committed by hobby drone users not covered by the proposed legislation.
It may therefore be preferable to allow state and local governments to continue to enact privacy-related legislation focused on specific unlawful or undesirable conduct that applies to both commercial and non-commercial drone operation. At the same time, certain existing federal and state laws that already regulate the maintenance and disclosure of personally identifiable information could be updated to explicitly apply to personal data collected by drone technology. This combination of federal and state protection to prohibit particularized, objectionable drone conduct, while also regulating the maintenance, use and disclosure of personal data, could be far more effective – and much less burdensome on those seeking to use drones for purposes other than data collection – than to require all drone operators to comply with burdensome pre-authorization and public disclosure requirements.
V. Other Issues
A few other issues in the proposed legislation are worth noting:
The bill specifically excepts from its coverage drones "operated for news-gathering activities protected by the First Amendment." Although this is an important exception in principle, the ambiguity regarding what drone operation might properly be covered by this provision will undoubtedly raise difficulties in application.
The bill also makes any operation of a drone in violation of the statutory provisions unlawful, and vests enforcement power principally with Federal Trade Commission. It also permits civil actions by states (subject to notice to and coordination with the FTC) against violators that are deemed to have threatened or harmed the interests of residents of the state.
Notably, the bill also creates a private cause of action for any person injured by an act in violation of the statute and allows both injunctive relief and monetary damages, including the greater of actual monetary loss or $1,000 per violation. As discussed above, because the proposed legislation focuses on compliance with pre-authorization and public disclosure requirements – as opposed to any actual misuse of personal information – it is questionable whether this private right of action would be effective in terms of safeguarding privacy, or whether it would become simply another statute under which individuals seek monetary damages based solely on an individual's or entity's failure to comply with regulatory requirements.
Given the current technological landscape, protection of personal privacy and personally identifiable information has never been more important. But there are already various federal and state laws that govern how personal information may be collected, used and disclosed. Drones merely present a new method by which personal information and data may be collected. However, not all drones are, or will be, operated for the purpose of collecting personal information. Many individuals and businesses seek to operate drones to perform tasks related to precision agriculture, aerial photography, infrastructure monitoring, product delivery, search and rescue, disaster response, and many other beneficial services that do not involve the collection of individuals' personal data or personally identifiable information. Rather than imposing additional regulatory hurdles on all drone users, it may be preferable to focus on regulating specific conduct or data collection and disclosure practices by those seeking to engage in such conduct. This may be most effectively accomplished by having the federal government share – rather than usurp – authority over drone privacy-related regulation. Caution should therefore be taken before enacting the proposed legislation, which would potentially nullify a substantial amount of state legislation already addressing drone impacts on personal privacy.
Ultimately, the proposed legislation, at least in its current form, may never become law. In fact, similar legislation was introduced in 2015 without success. However, the proposed legislation highlights important issues of privacy that should be considered and discussed as drone use and capabilities expand. The difficult task is finding the right balance between safeguarding individuals' reasonable expectations of privacy while still fostering innovation and expansion of the many beneficial current and anticipated uses of drones. To the extent the bill's purpose is to put the conversation regarding drones and privacy issues front and center, that mission will hopefully be accomplished. The public should be informed and aware of potential privacy concerns caused by drones and participate in legislative processes aimed at addressing those concerns. However, with regard to privacy protection, at least some of that legislation may be best handled at the state and local level. In any event, with the drone industry expected to continue its rapid growth for the foreseeable future, it is likely that public discussion and debate about drones and privacy has only just begun.
1. A copy of the proposed legislation is available at: https://www.markey.senate.gov/imo/media/doc/2017-03-14-DronePrivacy-Bill-text.pdf
2. The proposed legislation references estimates indicating that commercial drone sales may reach 2.7 million annually by 2020.
3. Although the bill only purports to require data collection statements for any drone approval or authorization as of the date of the enactment of bill, it nonetheless requires the FAA to publicly disclose information required in the data collection statement for every drone authorized to operate in the national airspace, including those operating pursuant to licenses or grants of authority awarded before the date of enactment. (See Sec. 339(a), (b)(1).) Thus, as a practical matter, the provisions of the bill would apply to all drones authorized to operate in the national airspace, whether approved before or after passage of the proposed legislation.
4. Although the proposed legislation does not discuss how its requirements would interact with the current regulatory framework, including the FAA's small drone rules, the legislation purports to require compliance with its provisions for any certificate, license, "or other grant of authority" to operate a drone – including authority granted prior to enactment of the law – which presumably encompasses any authorization bestowed by Part 107, as well as the remote pilot certificate required for operation under that section.
5. December 7, 2015 Fact Sheet: State and Local Regulation of Unmanned Aircraft Systems (UAS).
6. The FAA's decision not to address privacy issues in its small drone rules caused an uproar among many groups who hoped to see privacy regulation addressed by the FAA's drone rules. In fact, following release of the FAA's rule last year, the Electronic Privacy Information Center ("EPIC") sued the FAA for failing to address privacy issues in its rules.
7. See Florida v. Riley, 488 U.S. 445, 455 (1989).
Auhored by Lindsay Gehman
Influencer marketing saw explosive growth in 2016, with 86% of marketers having used the tactic, 94% of whom found it effective. In 2016, most marketers spent between $25,000 to $50,000 per influencer marketing program, which amounts are expected to double in 2017, with overall budgets increasing as well. Influencer marketing is a type of marketing that focuses on using key subject matter experts (or influencers) to drive a brand's message to the larger market in a more personalized, authentic way. An influencer is anyone who has a sizable network of people who follow and engage with them, usually over social media channels such as Facebook, Twitter, Instagram, Snapchat or YouTube.
While the reach and impact of influencer marketing is without question, the Federal Trade Commission (FTC) and other governmental and industry organizations are closely scrutinizing influencer marketing campaigns for indications of deceptive marketing practices, which could have financial and reputational repercussions for advertisers and agencies alike. The FTC publishes Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides), which are designed to reflect the principle that endorsements must be honest and not misleading. Generally speaking, the Guides provide that (i) an endorsement must reflect the honest opinion of the influencer and (ii) if a connection exists between an influencer and an advertiser that consumers would not expect and such connection would affect how consumers evaluate the endorsement, that connection should be disclosed.
Odds are, if you're an advertiser or agency, you've probably already incorporated influencer marketing as part of the your overall marketing strategy or offering. If not, you probably should. Either way, understanding FTC guidelines and recent decisions and adopting appropriate policies and best practices are crucial. A best practices checklist for how disclosures should be made, and what advertisers and advertising agencies can do to ensure compliance, are set forth below.
Advertisers and agencies must ensure that influencer disclosures are "clear and conspicuous." Below is a best practices checklist for disclosures:
- Use clear, plain and unambiguous language so that consumers understand the disclosure.
- Place the disclosure at the beginning of the post (or "above the fold") and as close as possible to the ads to which it relates.
- Ensure that the size, color and graphic treatment of the disclosure are easy to read in relation to the other parts of the post.
- Ensure that the disclosure is clear and visible on all devices, including mobile.
- Repeat disclosure as necessary on lengthy websites and/or in connection with repeated claims.
- Ensure that the disclosure remains intact when ads are republished or reposted.
The FTC holds advertisers responsible for ensuring that influencers comply with the FTC's guidelines. While the FTC has not yet held agencies or influencers themselves directly responsible for compliance, agencies and influencers may be held contractually liable through indemnification or other provisions vis-à-vis the advertiser. As such, advertisers and agencies are highly encouraged to take appropriate steps to ensure that the influencers engaged by them or on their behalf are in compliance. Below is a best practices checklist for what advertisers and agencies should do with respect to the influencers they engage:
- Adopt a written social media policy for all influencers they engage with.
- Train, instruct and contractually require influencers to make proper disclosures regarding their relationship to the advertiser and/or its products.
- Monitor influencers to ensure they are making the proper disclosures, both before, during and after posting.
- Terminate influencers who fail to make the proper disclosures and/or require them to take down or edit the applicable posts.
February 10, 2017
The February 15, 2017 deadline for nonprofit organizations in California seeking to initially obtain or renew exemption from property taxes is quickly approaching, and there are changes to the reporting requirements if your organization allows third parties to use your property.
In the past, if the owner and operator of a property were different, both had to apply separately for the Organizational Clearance Certificate (OCC) from the Board of Equalization (BOE) and then submit a Form BOE-267 or 267-A claim form to the county assessor. However, in a 2016 court case, Jewish Community Centers Development Corp. v. County of Los Angeles, 243 Cal.App.4th 700, the court held that only the owner of the property is required to file. Consequently, the BOE developed Form BOE-267-O. This form is required to be filed by an owner of property when any other organization or person uses the property, along with the additional documentation as specified below, depending on the nature and frequency of the operator’s use (Note that certain items noted below are not required if they were submitted with a previous filing):
If the property is used by an operator once per week or less, the owner must file:
- BOE 267 or 267A;
- BOE 267-O;
- Copy of the operator’s IRS and/or FTB tax exempt letter; and
- Copy of the written agreement.
If the property is used by an operator more than once per week, the owner must file:
- BOE 267 or 267A;
- BOE 267-O;
- Copy of operator’s IRS and/or FTB tax exempt letter;
- Copy of the written agreement;
- Copy of operator’s Articles of Incorporation or Bylaws; and
- Copy of operator’s operating statement and balance sheet for the calendar or fiscal year preceding the claim year.
An increased concern amongst many tax-exempt organizations is how to report use of their property by private persons or non-exempt organizations. The tax-exempt owner of the property will need to report all parties using the property with their Form 267 or 267-A by completing Form BOE 267-O. BOE 267-O requests the same information from both exempt and non-exempt operators. Where the operator is not tax-exempt, the filing organization will need to provide a description of the operator’s use of the property and demonstrate that each use is in furtherance of the filing organization’s permissible charitable purposes to obtain property tax exemption for that specific use of the property.
Another related deadline is also around the corner. If your nonprofit organization has business personal property, remember to file Form 571-L Business Property Statements by April 1st and be sure to submit and check the appropriate box on the BOE Form 267-A to request exemption of business personal property, which is any tangible property owned, claimed, used, possessed, managed or controlled in the conduct of your nonprofit’s activities (e.g. machinery, fixtures, office furniture and equipment). The BOE Form 267-A for your business personal property should be filed separately from any other BOE Form 267-A you submit for exemption of real property or a possessory interest in property; at least one county (San Francisco) has taken the position that a single BOE Form 267-A cannot be filed for all property interests.
Please contact Jeff Bernstein, Julie Treppa, or Alyssa Snyder if you have questions concerning your organization’s claim for the Welfare Exemption.
December 6, 2016
Next month, the procedural rules governing trademark registration disputes are changing. They present new strategic considerations for brand owners protecting their trademark rights.
The Trademark Trial and Appeal Board (“TTAB”) is implementing its first major procedural rule change since 2007. Unlike Article III federal courts, which adjudicate disputes over the use of a trademark, the TTAB resolves the narrower question of whether a trademark is entitled to federal registration. Effective January 14, 2017, the revisions will overhaul many aspects of TTAB procedure. They apply to both new and pending cases.
How will the changes affect brand owners? The answer depends on their objectives. On the one hand, the changes should make TTAB proceedings more efficient overall. For example, they will facilitate paperless transactions, impose new limits on discovery, and offer new tools for parties to reach early resolution. In a straightforward registration battle, they should help.
On the other hand, the streamlining may have unintended costs. For example, it may frontload discovery battles that previously could be postponed to the later stages of a dispute. The revisions also do nothing to strengthen sanctions for parties that do not comply with discovery obligations, an enduring problem in TTAB proceedings that Article III courts handle better. The stakes in TTAB disputes remain significant, particularly given last year’s Supreme Court decree (in B&B Hardware, Inc. v. Hargis Industries, Inc.) that a TTAB finding that one mark is confusingly similar to another can have preclusive effect in federal court proceedings. Given that fact, a streamlined TTAB case may not always prove to be the best venue for relief. In close calls, it may tip brand owners toward seeking the more comprehensive relief of federal courts.
The new rules include the following changes:
Complaints, Filings, and Service. The Board is now responsible for effecting service of complaints, which it will do only by email. All case filings must now be made through the Board’s electronic filing system, ETTSA, with very limited exceptions. Service is completed by email rather than physical mail, with no extensions for mail service.
Discovery Limits: Parties may serve a maximum of 75 requests for production of documents and 75 requests for admission, matching the existing limit for interrogatories. All discovery must be served early enough to ensure that responses are served within the 6-month discovery period.
Accelerated Case Resolution and Testimony. The rules expressly contemplate stipulations designed to expedite proceedings, such as limiting the amount or length of discovery, shortening the trial period, stipulating to facts, and allowing for motion evidence to be converted to trial evidence. Trial testimony may now be submitted by declaration or affidavit, subject to the right to oral cross-examination.
- Confidentiality. The Board is granted express authority to treat certain materials as not confidential, notwithstanding a particular confidentiality designation provided by a party.
A comprehensive record of the rules changes is available here.
The bottom line for brand owners: the TTAB’s rules changes should improve the efficiency of garden variety trademark registration battles. For more critical disputes, they may nudge parties toward the more comprehensive relief of federal court.
For further information about the forthcoming TTAB rules changes, and how they affect trademark enforcement, contact Thomas Harvey, firstname.lastname@example.org, or Karen Frank, email@example.com.
December 1, 2016
Under new Copyright Office regulations, parties seeking the benefits of immunity under the Digital Millennium Copyright Act must re-register their Designation of Agents for notice and service through a new electronic registration system. The deadline is December 31, 2017. Registration is conducted through the Copyright Office website, at www.copyright.gov.
Under the Digital Millennium Copyright Act (the “DMCA”), online service providers (“ISPs”) can take advantage of a safe harbor against copyright infringement liability from infringing material posted to their websites by third parties. This safe harbor is available where the ISP’s comply with certain steps, including the registration with the Copyright Office of a Designated Agent for notification of claimed infringements.
As of December 1, 2016, registration of Agents for notification of infringements under the DMCA must be done through the Copyright Office’s electronic registration system. Parties that previously registered through the Copyright Office’s paper registration system must re-register under the electronic system by December 31, 2017. Existing registrations will remain current to December 31, 2017. From December 1, 2016, new DMCA Agent registrations will be good for a three-year period and must be renewed, or will expire.
Information required to register an Agent for notification under the DMCA:
Designate a primary and secondary representative to serve as the contacts for DMCA notifications:
- The Agent can be an individual, a title, such as “Copyright Agent,” a department, such as “Legal Department,” or a third party entity (such as outside counsel).
Provide contact information for the primary and secondary Agent, including:
- Agent’s Name
- Agent’s Organization
- Agent’s Physical Mail Address (Post Office Box allowed)
- Agent’s Electronic Mail Address
- Agent’s Telephone Number
- Provide Contact Information for the Company (the service provider) (Post Office Box not allowed).
- Provide any Alternate Names used by the Company (the Service Provider), such as DBAs, website names, and other names that the public is likely to use to search for the service provider.
To create a DMCA Designated Agent Registration Account or to Designate an Agent for Service Provider, go to https://dmca.copyright.gov/osp/login.html.
For further information about designating an Agent under the DMCA, or for other copyright or trademark questions or requests for advice, contact Karen Frank at firstname.lastname@example.org, or Thomas Harvey at email@example.com.
Authored by Thomas Harvey; originally published in The Recorder, September 22, 2016.
Brand owners and their attorneys are grappling with an important question: how to disclose their connections to luminaries like PewDiePie.
If you haven't heard of PewDiePie, don't worry—he's a 26-year-old Swedish college dropout who likes to sit at his computer, play video games and shoot movie clips. But he also happens to operate the most popular YouTube channel in the world. He has nearly 50 million subscribers, and his commentary wields huge influence over the success of a video game release. Marketers pay him to exercise it. Last year, PewDiePie's production company reported an operating profit of about $8.1 million.
Brands have long valued "native advertising," promotional content that is similar to the news, articles and entertainment that surrounds it. But they are increasingly spending their dollars on the particular subspecies known as influencer marketing, in which individuals—ranging from stars (LeBron James) to quasi-stars (Kim Kardashian) to everyday people (a little-known blogger)—endorse products with messages that are personal, direct and authentic. The dollars at stake are substantial. According to a recent report, the most popular influencers (three to seven million followers) command an average of $187,500 per YouTube post, $75,000 per Instagram or Snapchat post, and $30,000 per Twitter post. Even lesser influencers (between 50,000 and 500,000 followers) command average payouts of $2,500, $1,000 and $400, respectively.
The proliferation of social platforms has created many new marketing opportunities for brands. But in these formats it is often impossible to distinguish between products that influencers happen to like and those that they are paid to endorse. Today, brand owners struggle with how to harness their authenticity without deceiving customers or falling afoul of federal disclosure requirements.
The Federal Trade Commission is watching carefully. Guided by Section 5 of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce," the FTC has increasingly focused on influencer marketing. Last December, it updated its guidance with a policy statement on deceptively formatted advertisements. In its long-held view, messages not identifiable as advertising are deceptive if they mislead consumers into believing that they are independent, impartial or not from the sponsoring advertiser. It explores this principle in the context of influencer marketing.
Click here to continue reading a PDF of the article.
August 18, 2016
Authored by Scott Hall; originally published in the Daily Journal, August 16, 2016.
The Federal Aviation Administration's recently announced rules for commercial operation of small Unmanned Aircraft Systems (UAS or drones), set to take effect later this month, provide long-awaited guidance to drone operators and manufacturers and open the floodgates of opportunity to many businesses that hope to utilize drone technology in various ways in coming years. Indeed, with reports predicting that the expansion of commercial drones could generate more than $82 billion for the U.S. economy and add 100,000 new U.S. jobs over the next decade, numerous companies are evaluating how they can capitalize on the greater availability of drones across many industries, including aerial photography and filmmaking, real estate, precision agriculture, infrastructure monitoring and surveillance and scientific research.
The FAA's new rules are expected to spark a significant expansion in the commercial use of drones primarily by removing the previously burdensome hurdles needed to obtain FAA approval for nonhobby/non-recreational drone use. Under the new rules, anyone can operate drones for commercial use as long as they do so in accordance with the FAA's stated rules and conditions. The rules, which restrict drone operation to daytime or twilight hours, impose weight and speed limits (drones must weigh less than 55 pounds and travel no faster than 100 miles per hour), and require that drones not fly over people and stay within the visual line of sight of the operator (who must have, or be supervised by someone having, a remote pilot's certification), are far less onerous than the previous requirements for obtaining specific FAA authorization for commercial drone use through airworthiness certifications, exemptions or certificates of waiver or authorization.
While the new rules are certain to foster increased use of drones in many industries, they are also notable in terms of what they say (and do not say) about the ongoing struggle — between federal, state and local governments — over who has responsibility and enforcement power over drones. Interestingly, the FAA's new rules emphasize the necessity of compliance with certain state and local laws in addition to abiding by federal rules and regulations. For example, the rules explicitly inform drone operators that "state and local authorities may enact privacy-related laws specific to [drone] operations." Additionally, while the FAA's new rules permit operation of a drone from a moving land or water-borne vehicle in certain circumstances, the rules note that state and local laws, including laws prohibiting distracted driving, may prohibit or otherwise restrict such drone operation. The FAA's rules unequivocally instruct that drone operators "are responsible for complying with all applicable laws and not just the FAA's regulations." Such a statement is in stark contrast to proposed legislation passed by the Senate earlier this year, which would have preempted all state and local laws relating to the design, manufacture or operation of drones. Such preemption language was not included in the version of the FAA Reauthorization Act passed into law last month, but the precise division of federal or state responsibility over drones remains unclear.
Although the FAA asserts broad federal authority over drone operations, it appears to recognize that states have the power to enact — and may be in the best position to address — laws dealing with privacy, trespass, zoning and other areas consistent with a state's police powers, that involve drones. But such distinctions may not prove workable in the context of the countless anticipated uses of drones, including remote delivery and aerial photography or mapping, to name just a few.
Numerous companies, for example, are currently developing businesses focused around the transportation or delivery of products or objects by drones. Certain states, however, such as Oregon, have passed laws prohibiting drone operation over private property. Such state laws will obviously prove problematic to any attempts by businesses to deliver products by drone, given that drones will almost certainly need to fly over private property to complete their deliveries. Other companies hope to use drones for aerial photography, mapping and other imaging and data collection purposes. But such use may conflict with state laws, including California's AB 856, that prohibit the use of drones to capture images or other data associated with private property. Moreover, any number of other state or local laws restricting drone operation in some way — based on public safety, zoning, privacy or other areas typically within the power of state governments to regulate — may hinder planned commercial drone businesses. Having to navigate through such a patchwork of inconsistent state laws may deter companies from investing in or expanding commercial drone operations.
Ultimately, where to draw the line in terms of federal and state responsibility over drones may not be as easy as carving out categories such as "privacy" or "public safety" since drone use is certain to raise questions as to the scope and applicability of traditional areas of law that have never been answered before. The FAA's new rules, while giving a nod to the validity of certain state and local drone laws in combination with federal rules and regulations, continue to leave open the questions that will ultimately need to be confronted regarding preemption. Thus, while the rules are sure to expand commercial drone use, some companies may hold back on fully pursing drone ventures until more of these questions are answered.
Fortunately, the FAA's new rules maintain flexibility for dealing with drones going forward, which is essential to foster current and anticipated commercial use of drones, while also determining how to most effectively police such use. While the rules for small commercial drones are a positive development for the industry, they are clearly only the first step towards comprehensively regulating the expectedly rapid expansion of the commercial drone industry.
Click here to view a PDF of the article.
August 17, 2016
On August 2, 2016 the U.S. Treasury Department issued proposed regulations addressing transfers between family members of interests in family-controlled entities (e.g., corporations, partnerships and LLCs). If enacted, these rules will eliminate most valuation adjustments for lack of liquidity and marketability (i.e. "minority interest discounts") for gift and estate tax purposes. Hearings on the proposed regulations are scheduled for December 1, 2016, and the final regulations may be effective thirty days later.
Currently, a taxpayer might hold a business, marketable securities or real estate in an entity (e.g., a partnership, LLC or corporation). A gift or sale of the taxpayer's non-controlling interest in the entity to his children or grandchildren, or a trust for their benefit, is typically appraised at a value that reflects minority interest discounts. These discounts arise from the recipient's inability to control the entity and to freely transfer or "cash out" of the transferred interest. Under the proposed regulations these minority interest discounts would be largely disregarded for gift and estate tax purposes.
Outright Gifts: Spouses previously formed an LLC with $20 million of assets. They gift a 20% LLC membership interest to a separate trust for the benefit of each of their 3 children and their descendants. An independent appraiser applied a 30% minority interest discount to each of the gifted interests in the LLC.
Under current law, each gift would be valued at $2.8M (instead of $4M if undiscounted). Similarly, the remaining 40% held by Spouses would be included in the survivor's taxable estate at $5.6 million (instead of $8M if undiscounted). Thus, the total value of the LLC that is subject to gift and estate tax is $14M, which is $6M less than the undiscounted value of the LLC assets.
This results in a savings of $2.4M in gift and estate tax compared to the tax if no gifting had been done. Further tax savings may occur as the appreciation and growth on the gifted assets is outside of the Spouses' taxable estates.
Sale: Another way that this transaction can be accomplished is by the sale of each Spouse's LLC membership interests to a trust in exchange for a promissory note. In that transaction, the sale would be at the discounted value and the note could be repaid at a low interest rate (e.g., currently as low as 1.18% for a 9-year note). Spouses may retain the cash flow from the assets in the LLC as the interest and principal is repaid on the note.
Again, the potential estate tax savings to the family could be as much as $2.4M. In this example all of the appreciation and growth above the interest rate on the note will also be outside the Spouses' taxable estates.
Under the proposed regulations, the minority interest discounts would essentially be disregarded under both examples. The resulting gifts, or the sales price, would be at the full $20M undiscounted value, and the potential $2.4M in gift and estate tax savings would be unavailable.
Clients who have an appropriate asset profile, and have contemplated lifetime gifts or sales to descendants, or trusts for descendants, should accelerate their consideration of this planning. The favorable valuation principles under current law may be unavailable as early as the end of 2016. Several months are often required to properly consider, document and implement such gifts.
Note: This article is only intended as an information alert, and a general summary of how the new proposed treasury regulations could impact estate planning opportunities. The application of these proposals in a particular client situation will vary, and should be discussed with qualified advisors to determine if further action is appropriate.