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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.

Best Practices

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.
  • Ensure that the disclosure is appropriate for the platform and complies with any applicable terms of use. For character-restricted platforms (such as Twitter), a hashtag such as #ad or #sponsored may be appropriate. For video platforms (such as YouTube), the disclosure needs to remain on screen long enough to be noticed and read (in other words, a disclosure in the description box alone is not enough).
  • 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.


Click here to download a PDF of this checklist.

For further information and assistance, including with respect to drafting social media policies and/or influencer agreements, contact Lindsay Gehman at lgehman@coblentzlaw.com.

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Click to view the Coblentz blog Unfamiliar Terrain: Navigating the complex Bay Area land use landscape

Click to view the Coblentz blog Law on Purpose: Perspectives on Social Enterprise, Impact Investing & Philanthropy

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.

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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, tharvey@coblentzlaw.com, or Karen Frank, kfrank@coblentzlaw.com.

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IMPORTANT NOTICE:

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 kfrank@coblentzlaw.com, or Thomas Harvey at tharvey@coblentzlaw.com.

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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

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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

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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.

Background

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.

Examples

  1. 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.
     
  2. 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.

Take-Away

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.

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Authored by Scott Hall and David Anderson; First published in the California Real Property Journal, a quarterly publication of the Real Property Law Section of the State Bar of California.

Combined with powerful state-of-the-art cameras and communications technology, drones are capable of efficiently and economically photographing, videotaping, and gathering other information for applications and in manners previously undreamed of. This impressive technological leap forward, however, has been accompanied by numerous documented instances of blatant misuse, which in turn, have prompted calls for state and federal lawmakers—including those in California—to spring into action. The legislative response to drones, however, has struggled to keep up with the technological capabilities and ever-expanding uses of drones. Additionally, lawmakers have failed to provide necessary clarity regarding the rights and restrictions of drone operation in the context of property rights in airspace above private property.

Instead, the limited legislative solutions enacted in response to drones have thus far focused on protecting privacy rights rather than establishing clear property rights. In October 2015, in response to public outcry over growing incidents of drone invasions of privacy, California enacted a widely-applauded law—AB 856—that directly addressed privacy concerns associated with drone use by prohibiting any knowing entrance into the airspace above the land of another person without permission in order to capture images, sounds, or other physical impressions of private activity. While this so-called “Anti-Paparazzi” law may give celebrities additional legal recourse against snooping paparazzi drones, it does little to protect the privacy of non-celebrities who may not have the financial resources or individualized incentives to pursue legal remedies for potential violations. Moreover, despite being technically couched as expanding the scope of unlawful “trespass,” AB 856 focuses on intentional conduct that invades privacy rather than clarifying the parameters of airspace property rights, and, in so doing, fails to provide needed guidance to both property owners and drone operators about what rights each possess when it comes to drone operation above private property.

Indeed, at the same time AB 856 was signed into law, Governor Jerry Brown vetoed other drone legislation that would have created a bright-line rule to protect airspace rights over private property by allowing property owners to prohibit drones from flying below a certain height over their property without their consent. In the wake of these legislative and executive decisions, the continuing lack of clarity regarding the scope of airspace property rights (including where drones may and may not operate) is likely to result in increased confusion about those rights. It may even lead to increased occurrences of property owners taking the law into their own hands. Various incidents around the country involving property owners shooting at drones, or otherwise attempting to prohibit drones from entering airspace above their property, suggest that many believe that the protection of such airspace is as important to the reasonable use and enjoyment of their property as the land itself.

Whether current laws are sufficient to deal with the new and unique issues presented by drones, or whether new drone-specific laws and regulations should be enacted—and what those laws should look like—is currently the subject of heated debate in California and throughout the country. Determining a workable resolution to these issues requires considering both the origins and shortcomings of current laws as applied to drones, as well as the unique capabilities and applications for drones now and in the future. This article briefly reviews the history of airspace property rights and how previously unresolved issues are being raised again in response to expanding drone use. The article then examines whether drone regulation is properly a federal or state issue before discussing recent California drone legislation. The article concludes by proposing that legislation beyond existing law is needed to create bright-line rules for protecting airspace rights up to a specified height above private property. This type of bright-line rule will not only give needed assurances to property owners about their airspace rights, but also facilitate greater support for, rather than opposition to, further development and application of drone technology across a variety of industries.

To continue reading, click here

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