Reports

Changes in the Model Business Corporation Act—Proposed Amendments to Section 7.23, Definitions in Section 1.40 and Related Sections

68(1): 137 - 154 (November 2012)
The Corporate Laws Committee of the ABA Section of Business Law (the “Committee”) develops, and from time to time proposes changes in, the Model Business Corporation Act (the “Act” or “Model Act”). The Committee has approved the changes described in this report on second reading and invites comments from interested persons. Comments should be addressed to A. Gilchrist Sparks, III, Chair, Corporate Laws Committee, 1201 N. Market Street, Wilmington, Delaware 19801-1147, or sent to him by e-mail at asparks@mnat.com. Comments should be received by March 1, 2013, in order to be considered by the Committee before adoption of the amendments on third reading.

Changes in the Model Business Corporation Act—Amendment to Section 14.34 Relating to Court-Ordered Dissolution

68(1): 155 - 156 (November 2012)
The Corporate Laws Committee of the ABA Section of Business Law from time to time makes changes in the Model Business Corporation Act. By publication after second reading in the May 2012 issue of The Business Lawyer, the Committee proposed an amendment to section 14.34 of the Model Act relating to court-ordered dissolution of corporations. At its meeting on September 22, 2012, the Committee approved the amendment to section 14.34 upon third and final reading without change.

Changes in the Model Business Corporation Act—Proposed Amendments to Sections 7.30 & 7.32 Removing Automatic 10 Year Limit

68(1): 157 - 162 (November 2012)
The Committee on Corporate Laws of the ABA Section of Business Law (the “Committee”) develops and from time to time proposes changes in the Model Business Corporation Act (the “Act” or “Model Act”). The Committee has approved the changes described in this report on second reading and invites comments from interested persons. Comments should be addressed to A. Gilchrist Sparks, III, Chair, Committee on Corporate Laws, 1201 N. Market Street, Wilmington, Delaware 19801-1147, or sent to him by e-mail at asparks@mnat.com. Comments should be received by March 1, 2013, in order to be considered by the Committee before adoption of the amendments on third reading.

Survey

Corporate Compliance Survey

68(1): 163 - 178 (November 2012)
This is the eighth survey from the Corporate Compliance Committee. This survey summarizes significant legal developments from the last year regarding corporate compliance and ethics programs, which consist of an organization’s code of conduct, policies, and procedures designed to achieve compliance with applicable legal regulations and internal ethical standards. For an overview and introduction to the subject, as well as updates from prior years, please see the prior surveys. This update assumes familiarity with the background and overview discussed there.

Survey

Survey of the Law of Cyberspace

Complete Cyberspace Law Survey Collection for November 2012

Survey of the Law of Cyberspace: Introduction

68(1): 179 - 182 (November 2012)

"There's No App for That": Calibrating Cybersecurity Safeguards and Disclosures

68(1): 183 - 196 (November 2012)
No bell tolled when it happened. But the term “cybersecurity” has become an oxymoron like “military intelligence” and “bug-free code.” For years the risks of cyber threats remained obscure because companies preferred not to disclose that they had been breached and damaged. The quantum of damages would similarly remain undisclosed, and damages to customers and third parties could not be quantified. Gradually, with data breach reporting statutes taking effect, the realities of quantified financial damages replaced surmise and speculation. During the period reviewed by this survey, April 2011–April 2012, the potential financial costs of a severe breach became clearer as evidenced by the data breach at Sony. The breach of Sony’s PlayStation Network resulted in approximately 100 million compromised customer accounts and remediation costs that Sony estimated at $200 million. Sony also faces the added costs of defending the fifty-eight class action suits filed against it based on the breach and any resulting damages if held liable.

Developments in the Law Concerning Geolocational Privacy

68(1): 197 - 204 (November 2012)
The law of geolocational privacy evolved in the past year in case law, in a new rule at the Federal Trade Commission, and in proposed federal legislation. The law of geolocational privacy arises from the use of tracking or locating technology to pinpoint more accurately the physical location of a person. Generally this tracking is performed using a mobile device or a beacon with global positioning system (“GPS”) capability. Smartphones offer several methods of tracking their holders, including GPS, triangulation of cell towers, and wi-fi pickups, and law enforcement regularly requests both real-time and historical information related to a cell phone’s location from phone companies without a warrant. Many cars have tracking technology from a manufacturer or insurance company. Cameras at intersections and buildings can be used for geolocational tracking because they show the time that a certain person entered the camera’s view, and security cards and toll booth fast passes clock a time and location.

Survey of Recent European Union Privacy Developments

68(1): 205 - 214 (November 2012)
During the past year, the European Union (“EU”) witnessed important privacy developments. Certain of these developments, including a preliminary ruling on Spain’s implementing legislation that added a condition to the processing of personal data, guidance on facial recognition and biometric technologies, and the meaning of consent, are discussed below. Other developments related to cookies, which are principally dealt with by telecommunications legislation rather than pure data privacy legislation, are addressed elsewhere in this year’s Survey of Cyberspace Law.

The EU E-Privacy Directive and Consent to Cookies

68(1): 215 - 224 (November 2012)
Under the previous legal regime, the use of cookies was governed by Article 5(3) of the European Union E-Privacy Directive (“E-Privacy Directive”) concerning the processing of personal data and the protection of privacy in the electronic communications sector. The storing of cookies was allowed only if the user was “provided with clear and comprehensive information . . . about the purposes of the processing and [was] offered the right to refuse such processing by the data controller.” As such, the former regime on cookies was an informed opt-out approach.

Survey of Recent FTC Privacy Enforcement Actions and Developments

68(1): 225 - 232 (November 2012)
The rapidly changing pace of technology has presented challenges to both businesses and consumers in reconciling privacy and business interests. This survey continues from last year’s survey delineating major developments by the Federal Trade Commission (“FTC”) to protect consumer privacy. It sets out the FTC’s recent enforcement actions, privacy reports by the agency, and further initiatives by the agency to address privacy.

L’Embarras du Choix: A Year of Developments in the Laws Affecting Remittance Transfers, Credit Cards, and Certain Prepaid Cards

68(1): 233 - 244 (November 2012)
Following Richard Cordray’s appointment as the first Director of the Bureau of Consumer Financial Protection (“CFPB”),1 the CFPB began to exercise the authority given to it by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”).2 Its recent final and proposed rules and additional notices of proposed rulemaking affecting e-payments and credit services are among the most significant e-payments developments since June 2011. However, they were not the only significant e-payments developments in the past year. Accordingly, this survey also covers selected developments from two other federal agencies, the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the Board of Governors of the Federal Reserve System (“the Board”), state-law developments related to remittance payments, and decisions from courts in the United States and the European Union since last year’s survey.

Electronically Stored Information in Litigation

68(1): 245 - 256 (November 2012)
The law governing the discovery and use of electronically stored information (“ESI”) in litigation continues to evolve, through case law spanning Zubulake1 to Pension Committee,2 amendments to the rules of civil procedure,3 and courtbased efforts to address the costs and burden of electronic discovery,4 in both state and federal systems.5 That evolution is driven in part by a need for litigation to adapt to new technologies and uses that continue to emerge, such as social media and cloud computing. In this survey, we review the cases that have addressed those new forms of ESI and then look briefly at recent developments in connection with what already can be regarded as more traditional forms of ESI.

Survey of E-Contracting Cases: Browsewrap, Clickwrap, and Modified Clickwrap Agreements

68(1): 257 - 262 (November 2012)
E-contracting is a method of creating contracts over the internet; E-contracting has not changed the principles of contract formation and interpretation. The two most common types of electronic agreements are “clickwrap” and “browsewrap” agreements. Clickwrap and browsewrap agreements are distinguishable by whether they require an affirmative action on the part of the user to manifest assent to their respective terms, such as clicking an “Accept” or “I agree” button. With clickwrap agreements (also referred to as “clickthrough”), the webpage user manifests assent to the terms of a contract by clicking an “accept” button in order to proceed. By contrast, browsewrap agreements (also referred to as “browserwrap”) do not require the webpage user to perform an affirmative act of assent; the user does not need to sign a document or click an “accept” or “I agree” button.

The Ethics of Lawyers Marketing Their Services on Daily Deal Websites

68(1): 263 - 270 (November 2012)
Recently, the state bars of Indiana, New York, South Carolina, and North Carolina issued ethics opinions on whether a lawyer may market legal services on “daily deal” and “group coupon” websites. A daily deal is a marketing and sales tactic whereby a merchant offers a discount for a product or service via a daily deal website. Examples of daily deals include discounts on products and services such as spa packages and restaurants. The daily deal websites are intermediaries between merchants and consumers. The Legal Ethics Committee of the Indiana State Bar Association (“Indiana Committee”) concluded that the use of such websites by lawyers is a violation of its rules of professional conduct while the other states’ committees found such marketing permissible if done within certain guidelines. This survey provides an overview of the two leading daily deal sites (Groupon.com and LivingSocial.com), the applicable ABA Model Rules of Professional Conduct (“Rules”), and a brief analysis of the ethics opinions from Indiana, New York, South Carolina, and North Carolina.

The European Union Model Interoperability Agreement for Electronic Business Documents

68(1): 271 - 280 (November 2012)
On February 15, 2012, the European Committee for Standardization (commonly referred to by its French acronym “CEN”) approved the Model Interoperability Agreement for Transmission and Processing of Electronic Invoices and Other Business Documents (“Model Interoperability Agreement”).

A Survey of Patent Law in Cyberspace

68(1): 281 - 288 (November 2012)
Over the past twelve months, the Supreme Court and the Federal Circuit have decided a number of patent cases involving a wide variety of issues. The Supreme Court decided Mayo Collaborative Services v. Prometheus Laboratories, Inc., a particularly important case concerning the patentability of a process doctors can use to determine whether a particular dose of a drug is too high or too low, but at the same time potentially affecting patents in all technology areas, including the internet. The Federal Circuit decided CyberSource Corp. v. Retail Decisions, Inc., a case concerning the patentability of a process and apparatus for determining whether a given online sales transaction is fraudulent. Leader Technologies, Inc. v. Facebook, Inc., also a Federal Circuit decision, addressed whether a prior sale or public use of an invention precluded the inventor from obtaining a patent on the invention. Finally, in In re Bill of Lading, the Federal Circuit clarified the pleading requirements for direct and indirect infringement.

2012 State of the Law Regarding Internet Intermediary Liability for User-Generated Content

68(1): 289 - 296 (November 2012)
Of the two major statutes that largely govern intermediary liability for usergenerated content—47 U.S.C. § 230 (“Section 230”)1 and 17 U.S.C. § 512 (the “DMCA”)2—the most significant updates from the past year have centered on the latter, particularly with two important appellate rulings regarding video-hosting sites. But jurisprudence surrounding Section 230 has also continued to solidify, with some notable updates as well.

A Survey of False Advertising in Cyberspace

68(1): 297 - 304 (November 2012)
As the internet plays a more important role in marketing, false advertising claims that target companies’ use of websites and social media continue to grow. Key cases from mid-2011 through mid-2012 evidence this phenomenon and introduce some new variations to false advertising claims. These cases include claims related to blog posts, pseudonymous online reviews, cybersquatting, and mobile applications.

Trademarks and Copyrights in Cyberspace: A Year in Review

68(1): 305 - 318 (November 2012)
This year’s trademark and copyright survey is combined to highlight the increasing effect of cyberspace on intellectual property law. Keyword advertising online continues to be a hot topic, as does the definition of what is copyrightable. We revisit the first sale doctrine this year, further exploring developments in the law as affected by internet sales. Finally, we conclude each section with some trends: for trademark law we look into a couple of cases of aggressive enforcement, and for copyright law we look into the development of the law surrounding how content owners are attempting to find online infringers and what the various courts are permitting.

Survey of Domain Name Cases 2011–2012

68(1): 319 - 323 (November 2012)
As in last year’s survey, several of this year’s Anticybersquatting Consumer Protection Act ("ACPA") cases analyze the definition of a "bad faith intent to profit." Another case examines a domain name registrar’s potential liability under the ACPA for domain forwarding. And a Ninth Circuit decision considers whether re-registration of a domain name can support a cyberpiracy claim. A survey of Uniform Domain Name Dispute Resolution Policy (“UDRP”) cases illustrates how individuals can prevent others from unauthorized use of their personal names.