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Ice Miller attorney  TJ Johnson was recently featured on Fox Business News for being the co- creator of ‘The Pocket Drone.’

TJ and his partner Timothy Reuter created a personal drone that makes high definition action photography accessible and convenient for consumers.  The Pocket Drone is the first ever drone that folds to the size of a 7-inch tablet, but still has the ability to carry a high-quality camera. The $495 retail price includes everything a consumer needs to fly the drone, except the camera.  In the three months since The Pocket Drone was introduced, Reuter and Johnson have booked orders of nearly  $1 million.

TJ asserts that “Designing and building products like ‘The Pocket Drone’ helps ensure that I am up to date with current technology and have some fun in my free time.  Personally experiencing the same challenges as our clients helps me understand their process and be better prepared to assist them throughout their business and product development.”

As an engineer with a background in designing and building electronic control solutions for motion control systems, Johnson has always been involved in projects such as this one.  Before pursuing a legal career, he started his own business designing and building embedded systems in his hometown of Reno, Nevada.

To see the interview, please follow this link: http://bit.ly/1n8oUHY, or visit www.airdroids.com for more information on The Pocket Drone.

Ice Miller Proudly Supports Junior Achievement

Posted by L. Marcum On March 31, 2014

Ice Miller was the proud VIP sponsor of Junior Achievement’s 26th Annual Central Indiana Business Hall of Fame event on February 20, 2014 at the Indiana Roof Ballroom. Close to 600 business leaders and their guests gathered to honor outstanding men and women who epitomize success in the business world, high moral and ethical standards, and dedication to important civic causes, thereby improving the quality of life in our community. Congratulations to our clients who were named 2014 Laureats:

  • Billie Dragoo – Founder, President and CEO, RepuCare
  • Dave P. Lindsey – Founder, President and CEO, DEFENDER Direct
  • David E. Simon – Chairman and CEO, Simon Property Group, Inc.
  • Michael Smith, Retired EVP/CFO, Anthem

The evening began with an exclusive VIP reception where Ice Miller Chief Managing Partner Phil Bayt spoke about Ice Miller’s appreciation of Junior Achievement. The mission of Junior Achievement aligns with Ice Miller’s efforts in the community, and our firm is grateful to past and present Laureates.

Junior Achievement students participated in the evening’s events, which included stories about the advancements made by the organization. Many Ice Miller attorneys attended the event to support the work  Junior Achievement and the Laureates do for the community.

2014 Laureates enjoyed meeting and listening to Junior Achievement students at the 26th Annual Central Indiana Business Hall of Fame event.

(left to right: Michael Smith, Phil Bayt, Andre Lacy)

Chief Managing Partner of Ice Miller, Phil Bayt, with 2014 Laureate Michael Smith and Chairman of the Board of LDI, Lt. Andre B. Lacy.

(left to right: T.J. Cole, Jason McNiel, Holiday Banta, Jessica McNiel, Joshua Christie, Julie Gasper, Andrew Vento, George Gasper)

Ice Miller attorneys and their guests attended the black tie affair to support Junior Achievement and the 2014 Laureates.

Chief Managing Partner of Ice Miller, Phil Bayt, speaking at the VIP reception in front of distinguished guests and the 2014 Laureates discussing his appreciation for Junior Achievement, what it contributes to the community and how Junior Achievement aligns with Ice Miller’s goals for civic involvement.

Ice Miller attorney Melissa Proffitt Reese and Eric Bedel of the Greater Indianapolis Chamber of Commerce at the Junior Achievement 26th Annual Central Indiana Business Hall of Fame event.

Ice Miller Supports TechColumbus Entrepreneurs

Posted by S. Rector On March 27, 2014

Technology-focused entrepreneurs in Columbus, Ohio, have a great resource in TechColumbus. Each year, more than 500 emerging technology companies reach out to TechColumbus for services and funding to grow into sustainable, profitable businesses.

Ice Miller is proud to support TechColumbus through the TechColumbus Expert Network (EN). EN is made up of like-minded professional service firms who understand the importance of helping emerging technology companies in Central Ohio grow into the economic drivers of tomorrow.

As part of EN, Ice Miller offers pro-bono and specially priced legal services to TechColumbus’ startup clients. Our firm helps entrepreneurs with a full range of services, including intellectual property protection, labor law advice, business structure and capital formation.

When we meet with TechColumbus clients, we begin with a discussion about the business itself—where the company is with its business plan and the entrepreneurs’ near-term and long-term goals. From there, we work closely with the client to develop a strategic plan to accomplish legal goals in an efficient and effective way.

To learn more about resources available to your business through TechColumbus, contact Susan Rector at susan.rector@icemiller.com.

The U.S. Supreme Court agreed to hear arguments in American Broadcasting Companies, Inc. v. Aereo, Inc. sometime in April 2014. The online streaming copyright infringement case has been watched closely by many in the entertainment and technology industries, as the Supreme Court’s ruling may change the way broadcast companies do business.

Background

Originally filed in New York in 2012, several broadcasters, including ABC, NBC, CBS and Fox, sued Aereo for copyright infringement. Aereo is an online streaming subscription service that functions much like the infrastructure in the landmark Cablevision decision. Aereo owns thousands of standard television antennas, just like the ones an average person would use to receive broadcast stations. Aereo then assigns customers an individual antenna for a fee of $8-$12 a month. Customers can record and stream live broadcasts through the internet and view on his or her computer, tablet or smartphone.

Although a customer could use an antenna the same way as Aereo without legal implications, the plaintiff broadcast companies argue Aereo is guilty of copyright infringement because it is retransmitting performances in violation of the plaintiffs’ public performance rights. The plaintiffs sought a preliminary injunction two weeks before Aereo was set to launch in the New York area. The district court denied the injunction, holding that while the broadcasters would likely suffer irreparable harm if Aereo was allowed to launch, they did not show a likelihood of success on the merits of their copyright claims. The court relied on its prior decision in Cablevision, which held that a system where customers could record television broadcasts on a remote hard drive assigned to each individual customer was not a retransmission because the potential viewing audience was limited to that specific customer. The 2nd Circuit Court of Appeals upheld the district court’s decision in April 2013.

While Aereo was being appealed in New York, two other cases involving nearly identical subscription streaming services reached the courts in Los Angeles and Washington, D.C. The broadcasters were successful in both of those cases, and the courts held the streaming companies violated the broadcasters’ public performance rights when they did not pay to retransmit the broadcasts. As a result of these conflicting opinions among the circuits, Aereo was ripe for the Supreme Court.

Impacts of Supreme Court’s decision

The road to the Supreme Court was unusual because typically, the party who won in the appellate court fights a petition for certiorari. Here though, Aereo joined the petition so that the case could be resolved on the merits and Aereo would know once and for all if other suits could be brought against it in other jurisdictions. Other parties are more concerned by the underlying issues of the case and filed briefs in support of the petition for certiorari. Some of the parties that filed amicus curie briefs in support of the broadcasters include the National Football League and National Baseball League; the American Society of Composers, Authors and Publishers (ASCAP); Broadcast Music Inc. (BMI); Time Warner; Metro-Goldwyn-Mayer; and the Screen Actors Guild. While no briefs have been filed yet in support of Aereo, the Computer Communications Industry Association, which includes members Yahoo, Google, Facebook and Amazon, initially filed a brief supporting Aereo with the Court of Appeals.

The broadcasters believe a verdict upholding the 2nd Circuit decision will destroy the business models of all broadcasting companies. Fox went so far as to threaten that the company would convert to a cable pay-tv channel if Aereo was not forced to shut down. The underlying problem for the broadcasters is that a significant portion of their revenue comes from retransmission fees paid by cable and satellite providers to rerun shows. The 2nd Circuit’s ruling opens the floodgates for other services to use an Aereo-like infrastructure to avoid paying the broadcasters. Therefore, the broadcasters fear that soon, no one will pay to retransmit copyrighted shows and the broadcasters will lose a significant portion of their revenue.

Aereo argues that the case is about the right of every American to use a television antenna. In so doing, it frames the issue around putting the control and choice back into customers’ hands as to what television programming the customer wishes to watch. Significantly, Aereo also raises the argument that customers have a right to use new technology, which includes the cloud, to access broadcasts through an antenna and DVR.

The Court’s decision will likely have far reaching implications. If the Court upholds the 2nd Circuit’s ruling that the broadcasters are unlikely to prevail on their infringement claims, broadcasting companies will have a strong incentive to abandon their free-to-customer business model in favor of pay-tv stations, just to recapture the lost retransmission fee revenue. While this will reduce the free content available to the public, a Forbes article reporting a recent SNL Kagen statistic shows that of the 114 million homes with a television in the United States, 103 million already pay for cable or satellite services. Therefore, a very small percentage of TV’s would be affected.

From the other side, companies that rely on cloud technology are following the case closely as a decision overturning the Second Circuit may impact how companies can offer cloud-based services to customers. Specifically, the Court has the opportunity to overrule Cablevision, which may alter a company’s ability to use the cloud without violating copyright laws.

The Court will hear arguments in April and is expected to reach a decision this year.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

On Sept. 10, 2013, the 9th Circuit Court of Appeals affirmed the district court’s refusal to dismiss claims brought against it under the Federal Wiretap Act, 18 U.S.C. § 2511 (the “Wiretap Act”) in Joffe, et al v. Google, Inc.  The claims arose out of Google’s collection of data from unencrypted Wi-Fi networks in the course of capturing photographs for Google’s Street View. 

Street View, launched in 2007, allows Google Map users to  see street-level photographs of the area being viewed.  The photographs are captured by cameras mounted on vehicles owned by Google that photograph their surroundings when driving on public roads.   Between 2007 and 2010, in an effort to improve its location-based services (like driving directions), Google equipped these cars with Wi-Fi antennas and software able to collect data transmitted by nearby Wi-Fi networks. The software was intended to collect only basic information about the Wi-Fi networks, such as the network’s name, the signal strength, and whether the network was encrypted.

However, the software and antennas collected much more information than its original purpose, including data sent and received over unencrypted Wi-Fi networks. Specifically, the cars collected “payload data,” or anything transmitted by a device connected to a Wi-Fi network. The information included personal emails, usernames, passwords, videos, and documents from anyone who was using an unencrypted Wi-Fi network when the car drove past. The cars collected payload data in more than 30 countries.

In 2010, Google acknowledged that its vehicles had been collecting fragments of payload data, publicly apologized, and rendered inaccessible the personal data that had been acquired.  Shortly thereafter, several putative class-action lawsuits were filed, each of which was transferred by the Judicial Panel on Multidistrict Litigation to the Northern District of California.  The plaintiffs alleged that Google violated several state privacy law claims and the Federal Wiretap Act, which makes it unlawful to intercept certain communications and serves to protect wire, oral, and electronic communications.

 Appealing the district court’s denial of its motion to dismiss the Wiretap Act claims, Google argued that the data transmitted over the unencrypted Wi-Fi networks were “electronic communications…readily accessible to the general public,” and therefore its actions were exempt from Wiretap Act liability pursuant to 18 U.S.C. § 2511(2)(g)(i). Specifically, Google argued that 1) Wi-Fi is a type of radio communication, which under the Act is by definition readily accessible to the public and 2) if Wi-Fi is not a radio communication, it is still readily accessible to the public under the general meaning of the phrase. The 9th Circuit disagreed with both arguments. In rejecting the second argument, the court specifically explained that data transmitted via Wi-Fi is not “readily accessible” as it has a small range (less than 330 feet), can only be intercepted and interpreted with sophisticated hardware, software, and expertise that the general public lacks.  While recognizing that the hardware and software required could be purchased at many electronics stores, the court reasoned that if a person of the public were to somehow receive such data, that person would only interpret it as white noise.

As explained this New York Times article, the next step is for the  plaintiffs to seek class certification.  If the plaintiffs are successful, the class could include millions of people, exposing Google to significant damages.  Privacy and consumer watch groups are also pleased with the 9th Circuit’s ruling.  The executive director of the Electronic Privacy Information Center, Marc Rotenberg was quoted in this CBS/AP article, calling the ruling “a landmark decision for Internet privacy.”  John M. Simpson, Consumer Watchdog’s privacy project director, called it a “tremendous victory for privacy rights.” 

While Google has claimed that a “rogue engineer” was at fault, a Federal Communications Commission investigation concluded that the engineer was merely acting without supervision. As explained in this CNET article, Google has already reached a $7 million settlement with 37 states and the District of Columbia over this collection of data from unsecured wireless networks.  Google also agreed to destroy the collected data, create a new employee training program on protecting consumers’ privacy, and launch a national ad campaign educating consumers on how to protect their privacy online.  With regard to that settlement, Google released this statement:  “We work hard to get privacy right at Google.  But in this case we didn’t, which is why we quickly tightened up our systems to address the issue.  The project leaders never wanted this data, and didn’t use it or even look at it.”  It is yet unclear how Google’s settlement with these states may impact the Joffe putative class action.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

In a June 11, 2013, ruling issued without opinion,  the U. S. Court of Appeals for the 7th Circuit declined to review a district court ruling certifying a plaintiff class alleging privacy violations against defendant comScore Inc.

As set forth in the opinion issued by the U. S. District Court for the Northern District of Illinois, comScore gathers data about the activities of consumers on the internet through its program OSSProxy, analyzes the data and sells the data to comScore’s clients.   OSSProxy is often distributed in cooperation with “bundlers” who provide free digital products, such as screen savers and games, to consumers on the internet.  During the installation of the free digital product, consumers are presented with a short statement regarding OSSProxy (presented under one of several brand names), offered a link to a “Privacy Statement and User License Agreement” and must either accept or decline before he or she may continue downloading the digital product.   OSSProxy downloads only if the user checks “accept.”  While the free digital product will download and install regardless of the user’s choice regarding OSSProxy; this fact is not readily apparent to the consumer.

The plaintiffs allege that comScore exceeded the scope of the consumer’s consent to monitoring, thereby violating the federal Stored Communications Act (18 U.S.C. § 2701(a)(1), (2)); the Electronic Communications Privacy Act (18 U.S.C. § 2511(a), (d)); and the Computer Fraud and Abuse Act (18 U.S.C. § 1030(a)(2)(C)).  The plaintiffs also asserted a claim for common law unjust enrichment and sought certification of a class of “All individuals who have had, at any time since 2005, downloaded and installed comScore’s tracking software onto their computers via one of comScore’s third party bundling partners.”

In a statement posted on its website, comScore responded to the allegations, claiming that the “suit is filled with factual inaccuracies” and maintaining its position that the lawsuit is without merit.  According to the statement, comScore “prides itself on its privacy and recruitment practices, which have been rigorously reviewed in annual privacy audits conducted by independent third party auditors for the last 10+ years” and plans to defend itself against the allegations.

The district court declined to certify a class with regard to the unjust enrichment claims, holding that substantial variations in state laws would make it too difficult to determine the merits of each class member’s claim in a single action.  Nevertheless, the court determined that the matter could proceed as a class action with regard to each of the federal statutory claims asserted.   As the district court explained, hundreds of thousands of computers have reported data to comScore through OSSProxy each year since 2008.  Accordingly, comScore must now defend against a class likely to total well over a million members.

As explained in this New York Law Journal article, plaintiffs in putative privacy class actions have typically struggled to demonstrate damages resulting from alleged privacy violations.  In comScore, however, the plaintiffs based their claims on statutory damages and therefore were found to have standing and were certifiable as a class. This could signal a new trend of massive class-action lawsuits based on privacy violations.  The district court opinion at least provides a roadmap for how privacy plaintiffs can meet Rule 23 requirements.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

Ice Miller was a sponsor of  the TechPoint Entrepreneur Bootcamp that took place on Friday, July 26 at Launch Fishers.  The day consisted of discussions and workshops to help entrepreneurs answer 5 key questions:

1. Is my business idea any good?
2. How do I prove that my business idea will work?
3. How should I structure my business?
4. How should I fund my business?
5. How should I pitch my business to investors?

The event concluded with Jeff Hoffman, cofounder of Priceline.com speaking to the group about his experiences and words of advice to those in the room.

_____________________________________________________________________________________

Jeff Hoffman, cofounder of and active entrepreneur mentor at VentureCamp, told an audience of startups and entrepreneurs to quit talking about their ideas and to just go out there and build it. “Don’t explain it, go build it and let the work speak for you,” Hoffman said.

Read more about his on the TechPoint blog  HERE.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

In anticipation of an upcoming animated film inspired by the traditional Mexican holiday El Día de los Muertos (in English, The Day of the Dead), Disney recently filed a series of applications with the United States Patent and Trademark Office seeking to trademark the phrase “Día de los Muertos.” After a social media firestorm, however, Disney’s attempt turned out to be dead on arrival.

El Día de los Muertos is a holiday to honor departed loved ones that originated in Mexico and is now celebrated by millions in other parts of Latin America, the United States and across the globe. To many, Disney’s attempt to trademark the phrase was seen as an attempt to capitalize on a cultural tradition that would be akin to attempting to trademark words like “Christmas” or “Easter.” People expressed their outrage on Twitter and started a change.org petition to stop the trademark application from proceeding that garnered 19,500 signatures in one day. According to some reports, the proposed trademark “momentarily replaced immigration as the hottest topic among Latinos on Twitter.”

About a week after the filing (and a day after the internet outcry began), Disney decided to withdraw the applications. In a company statement, Disney wrote that the “trademark filing was intended to protect any potential title for our film and related activities. It has since been determined that the title of the film will change.” The online backlash was not mentioned specifically, and the attorney who filed the application on Disney’s behalf declined comment. Disney experienced similar public protest regarding another past trademark application. In 2011, USA Today reports that Disney attempted to trademark the name “Seal Team 6″ (referring to the group of Navy Seals who killed Osama Bin Laden), but later withdrew the application “out of deference to the military.”

While some questioned the wisdom of these trademark attempts from a legal perspective, Disney’s crises over its intellectual property strategy illustrate the growing role that public perception plays in a company’s decision to obtain or to enforce its trademark rights.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

Trademark Clearinghouse Has Begun Accepting Registrations

Posted by S. Rector On April 16, 2013

As early as next month, the first of nearly 2,000 new generic top level domains (gTLDs) could begin being made available to the public at the rate of 20 per week. A gTLD is the suffix of web addresses, which generally address the subject matter of that domain. The Internet Corporation for Assigned Names and Numbers (ICANN) has been working for years to increase the number of available gTLDs beyond the 22 familiar .com, .net, .biz and .info gTLDs and the 250 country codes. This latest expansion is unprecedented in number and will add more generic terms (e.g., .hotel, .auto, .food, etc.) and for the first time brand-specific terms (e.g., .amazon and .nike). A full list of the proposed new gTLDs organized by category may be found at the New gTLD Site here.

With the launch of the new gTLDs is the heightened concern that third parties could register and establish domain names and websites using the gTLDs that incorporate legitimate business names, trade names and trademarks of others. For example, a registrant could attempt to appropriate the well-known Nikon camera name and mark by registering www.nikon.photography. To address these concerns and implement protective measures for trademark owners, ICANN has established the Trademark Clearinghouse. The Clearinghouse is a centralized repository of validated trademark rights. Trademark owners who record (register) their marks will have their claims of trademark rights verified by Deloitte’s authentication and validation services and included in a database maintained by IBM, both under contract with ICANN.

Benefits of Recording in the Trademark Clearinghouse

The three main benefits of recordation for trademark owners are as follows: First, those owners will have the opportunity to reserve their mark-specific domain names for at least the first 30 days during the Sunrise Periods for the new gTLD (meaning the initial launch phase of each gTLD) before other members of the public may register domain names within that gTLD. In fact, only those with marks recorded in the Clearinghouse will be able to register during the Sunrise Period. Second, registrants will receive at least 30 days’ notice before each new gTLD goes live. Third, during the Trademark Claims Service period (at least the first 90 days after a new gTLD is available to the public), any third party attempting to register a domain in the new gTLD that exactly matches a recorded mark will be warned about the owner’s rights in the mark before registration is granted. Ideally, the registrant would abandon its domain name application once it learns of the owner’s claim to the mark. However, if the registrant proceeds with registering the domain name, the Clearinghouse will notify the mark owner of the registration but will not take any adverse action against the registrant on the owner’s behalf.

Limitations on Clearinghouse Recording

The registration process only allows for registration of and protection against new domain names that are identical to registered marks. The registration is not available for unregistered marks or marks that are the subject of a pending application. Due to the identical match requirements between marks and the domains, owners will have no Clearinghouse protection against commonly misspelled versions of the marks, plurals, shortened marks, etc. Since trademarks from many jurisdictions can coexist in the Clearinghouse, it is possible that conflicts will arise between legitimate mark owners with rights who have met the Clearinghouse recordation guidelines through different avenues.

Mechanics and Limitations of Registering

To record a mark with the Clearinghouse, owners must submit an application, the applicable fee and proof of use. Recordation is generally only available for (1) text-only marks registered on the U.S. Patent and Trademark Office’s Principal Register or with another national trademark office, (2) court-validated marks and (3) marks protected by statute or treaty. Not all trademarks are eligible. Trademarks containing a dot (such as amazon.com) and state-registered marks are not eligible. Special rules apply to symbols that are not recognized in domain names such as @ and &.

Timing

The Clearinghouse opened on March 26, 2013, and will remain open throughout the duration of the launch of the new gTLDs. This could be as early as May or June 2013 and will last until the last gTLD is launched (that could be as late as 2015 or thereafter). In order to take maximum advantage of the Clearinghouse and have opportunities to register their marks during the Sunrise Periods for the first gTLDs to be released later this spring, trademark owners should consider early registration. The first gTLDs to be released are those in non-Latin script. For example, the second gTLD set to launch is the gTLD Amazon is launching with the Japanese characters that mean .store.

Who Should Record Marks in the Trademark Clearinghouse

Trademark owners should determine if they wish to file to (1) protect their marks in any of the roughly 1,900 gTLDs or (2) defensively prevent any third party from registering any of its trademarks as a domain name with a new gTLD (e.g., .suck., .porn). However, if a trademark owner desires to file any domain name that corresponds to its mark during the Sunrise Period of any gTLD, the only way to be able to make that filing in the first days of the gTLD launch is to register its mark in the Trademark Clearinghouse. Owners must weigh the costs and benefits in determining whether to record/register marks in the Trademark Clearinghouse and whether to file to protect or block a domain name.

It is important to remember that recording in the Trademark Clearinghouse does not create or enhance legal rights. But it does give trademark owners the ability to monitor the rollout of the new gTLDs and to file offensive and defensive domain name applications. There are limits to the protection however. The Trademark Claims Service is only in effect for at least the first 90 or more day period established by the new gTLD registration. Thus it may be desirable to engage a commercial monitoring service after the Trademark Claims Service period has run.

ICANN’s plans for deploying the new gTLDs are ongoing and subject to change. Trademark owners will want to pay close attention to the ongoing news releases regarding the gTLDs and their Sunrise Periods and to timely file relevant sunrise applications as well as defensive domain name registrations. Please contact your trademark counsel to discuss the options available to you to protect your marks now that the gTLDs will soon launch.

For additional information, please contact Susan Rector at (614) 462-2338 and susan.rector@icemiller.com, or any member of Ice Miller’s Litigation and Intellectual Property Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

On April 2, 2013, the United States Securities and Exchange Commission (SEC) issued a Report of Investigation clarifying that companies can use social media sites to communicate corporate information, in compliance with Regulation Fair Disclosure (Regulation FD), as long as investors have been alerted about which social media will be used to disseminate such information.

Regulation FD (17 CFR 243.100-243.103), according to the Report, was “adopted out of concern that issuers were selectively disclosing important nonpublic information, such as advance warning of earnings results, to securities analysts or selected institutional investors before making full disclosure of the same information to the general public.” (See also http://www.sec.gov/rules/final/2010/33-9146.pdf). The Regulation requires public companies to either file a form 8-K with the SEC or to disseminate “material nonpublic information” regarding the company or its securities through a “method (or combination of methods) of disclosure that is reasonably designed to provide broad, non-exclusionary distribution of the information to the public.” Conservative practice has typically been for companies to file an 8-K as the primary – or at least contemporaneous – form of disclosure.

As explained by the Commission (and in this April 2, 2013 press release), the Report was prompted by a Division of Enforcement inquiry into whether Netflix violated Regulation FD when its CEO Reed Hastings posted to his personal Facebook page that Netflix’s monthly online viewing had, for the first time, exceeded one billion hours.  The information was not reported by Netflix through a form 8-K filing and was not included in a company press release issued later the same day. Netflix had neither used Hastings’ Facebook page for disseminating company information in the past, nor taken steps to alert investors that Hastings’ personal page might be used to communicate corporate information.  Netflix’s stock increased from $70.45 at the time of the post to $81.72 at the close of the next trading day.  The SEC did not initiate an enforcement action against Netflix or Hastings, but issued the Report to clarify how Regulation FD and the Commission’s 2008 Guidance on the Use of Company Web Sites (directed primarily at the use of corporate websites for the disclosure of material, non-public information) apply to disclosures made through social media channels.

The Report ultimately clarified that “the principles outlined in the 2008 Guidance – and specifically the concept that the investing public should be alerted to the channels of distribution a company will use to disseminate material information – apply with equal force to corporate disclosures made through social media channels.”  The SEC emphasized that the steps taken to alert the market about which forms of communication a company intends to use for the dissemination of material, non-public information, including the social media channels that may be used and the types of information that may be disclosed through these channels, are critical to the fair and efficient disclosure of information.  Without such notice, the investing public would be forced to keep pace with a changing and expanding universe of potential disclosure channels, a virtually impossible task.

The Report further identified a number of methods a company could use to provide the required notice to investors, for example by providing information about the social media channel in periodic reports, press releases, or on the company’s website

Ultimately, while highlighting that every case must be evaluated on its own facts, the SEC found that disclosure on the personal social media site of an individual corporate office, without advance notice to investors that the site might be used for this purpose, is unlikely to meet the requirements of Regulation FD.

For more information on corporate disclosure requirements or the use of social media in your business, contact info@theiceloop.com.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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