New York Business Lawyers: Incorporation, venture capital, acquisition, convertible notes, tech, e-commerce Thu, 01 May 2014 19:42:21 +0000 en-US hourly 1 New Corporation Formation and Planning Questionnaire Thu, 01 May 2014 19:42:21 +0000 When forming a new venture to be conducted through a new corporation, certain key considerations routinely come into play. As a result, robust planning in and around these considerations will assist anyone entering into a shareholder, director, and officer relationship in connection with the new entity. The following questionnaire produced by our firm lays out those routine considerations and provides a strong planning foundation for founders.

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Limited Liability Company Planning Questionnaire Thu, 24 Apr 2014 13:30:36 +0000 When forming a new venture to be conducted through a new limited liability company (LLC), certain key considerations routinely come into play. As a result, robust planning in and around these considerations will assist anyone entering into a partnership relationship in connection with the new entity. The following questionnaire produced by our firm lays out those routine considerations and provides a strong planning foundation for founders.

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Breakdown and Summary of Literary Option Agreement Thu, 17 Apr 2014 13:03:29 +0000 With the speculative, costly and long-term nature of developing various literary properties (i.e., books graphic novels, etc.) for screen (i.e., film, TV, etc.), producers require an effective mechanism to secure rights for a limited time (without having to spend exorbitant sums for a project that may never secure the financing or other elements necessary to actually enter production). Hence, option agreements are designed to give producers a window to assemble financing and other elements, without having to commit monies to purchase screen rights immediately.

During the option period, the producer is granted a time limited, exclusive right to produce the screen version of the underlying optioned work. Also during that period, the producer will attempt to secure capital, attachments, and other key elements that would justify committing to “purchasing” the option.

Purchasing the option involves providing the optioning party a more substantial cash payment and other “contingent” compensation promises (e.g., points off the receipts from the movie) for perpetual rights. At that juncture, a purchase agreement will likely supplant the option agreement (though such agreement will likely carry many of the provisions originally captured in the option agreement), granting the producer the rights to produce and commercially exploit the motion picture, TV program, etc., in perpetuity.

Certain salient terms of both the option agreement and an attendant purchase agreement are described below:


Property: Nearly all option agreements begin with a basic recitation of what the underlying copyrighted literary work is, inclusive of copyright registration, publication history, etc.

Purchaser and Owner: Typically, option agreements are phrased in terms of “Purchasers” and “Owners” or “Buyers” and “Sellers.” Purchaser or buyer refers to the producer who is optioning the rights, whereas seller or owner refers to the optioning party (usually the individual author, a publishing house, or some other rights holder.)

Relationship: Nearly all option agreements carry a provision that makes clear that the relationship between the optioning party and the producer is one of independent contractors that does not give rise to joint authorship or a partnership.

Option Period: All option agreements lay out producer’s temporary exclusive rights to exploit and develop the underlying literary property for screen. During this timeframe, the producer typically will seek performer attachments and/or investor capital, and may commission the writing and/or polishing of screenplays. However, the producer is not obligated to maintain nor exploit such rights and may abandon the project at the expiration of the Option Period.

Renewal/Extended Period: Nearly all option agreements carry multiple timeframes, beginning with the initial Option Period. Following the expiration of the initial timeframe, many option agreements permit the producer to provide additional consideration to the optioning party for extra time. A classic scenario can involve an initial term of twelve to eighteen months, with one or two renewal(s)/extension(s) of one year each.

Purchase Price: This refers to the cash or consideration that producer will provide for perpetual (with some exclusions) rights to produce the motion picture, TV program, etc., following the Option Period. Purchase prices vary wildly and are a function of the market and brand cachet of the underwriting literary work, against several factors (e.g., age of the property, circulation of the property, brand value of the property, etc.). Secondly, in certain instances, the option price that was paid for the Option Period may be “applicable” towards the purchase price, meaning the purchase price is reduced by what was already paid for the option period.

Notice of Exercise: The written notification whereby the producer gives notice to the optioning party that it will renew the Option Period, extend the Option Period, or purchase the rights in perpetuity. This is a formal process that usually requires, at a minimum, a clear and express written intention to exercise, coupled with a record of transmission.

Rights: This portion of the agreement is critical and sets forth the metes and bounds of what the producer actually gets to do with the underlying work. Extreme care should be taken to assure that the rights provisions are reasonably broad and as expansive as possible. While the core right to produce the screen version is usually set forth, there are a variety of other related rights that need to be properly reflected. For example, the option agreement should make clear that the producer not only has the right to make the movie, TV program, etc., but also has the opportunity to write copy in connection with the promotion of the finished product, as well as commercially exploit and distribute or exploit the finished product across a variety of mediums (including those that may not exist yet). Furthermore, the producer may seek to have the right to make prequels or sequels based on the finished product (subject to additional fees to be paid to the optioning party). Again, these rights are temporary, until they are “purchased” in perpetuity.

Representations and Warranties: These core provisions provide representations and warranties on the part of the optioning party that the literary property is free and clear of liens, encumbrances, or other obligations that may hinder the producer from properly exploiting the motion picture, TV program, etc. Moreover, there is typically a representation and warranty that the underlying literary property does not infringe on third-party works and is solely the work product of the optioning party (or that the optioning party has rights to be the optioning party vis-à-vis others, for example, joint authors).

Indemnification: The representations and warranties section is typically paired with an indemnification provision. This clause allows the producer to bring the optioning party into a legal proceeding and/or have the optioning party reimburse the producer for damages suffered in that proceeding, in the event that any of the representations and warranties prove to be false. This is especially important when third-parties claim that the underlying property infringes some other work.

Credit: A set of provisions that sets forth how the author(s) shall receive on-screen, paid ad, and/or other credit in connection with the completed movie, TV program, etc.

Assignment: Producers should make sure that the option agreement carries a robust assignment provision, allowing them to transfer rights from their own production company (or whomever optioned the rights from the optioning party) to a “single-purpose vehicle” entity or other third-party (either without consent, or limited consent from the optioning party). Without such a provision, the producer may foreclose to opportunity to sell rights to or position rights in an entity that will produce the screen version and/or seek investment capital.

Force Majeure: This provision absolves either party of liability for breach caused by Acts of God and other calamities outside the control of the parties that would make it extremely burdensome or impossible to carry out the obligations in the agreement.

Arbitration: When resolving disputes arising from entertainment contracts, arbitration is often a good alternative to using the court system, as a result of its streamlined process, knowledgeable arbiters, and frequently lower costs. Some option agreements call for arbitration before entertainment arbitration boards that have experience with these types of arrangements.

Droit Moral: Option agreements typically carry provisions whereby the optioning party expressly waives rights to affect the exploitation of the finished product based on the concept of “Droit Moral.” Droit Moral, also known as a “moral rights” clause, refers to the author’s right to prevent alteration of the creative work, irrespective of a transfer of ownership. This right is recognized primarily in European countries.

Waiver: This provision makes clear that any waiver that either party expresses due to a breach by the other party is not a permanent waiver, but rather a waiver for that instance alone, thus protecting the waiving party and allowing that party to seek remedies for any future breaches.

Severability: In the event that any provisions are found to be unenforceable, this provision allows the parties to enforce the remaining portion of their agreement.

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Breakdown and Basics of a Non-Disclosure Agreement Wed, 08 Jan 2014 14:30:09 +0000 By: Kaiser Wahab

Non-Disclosure Agreements (“NDA”) lend security to the dissemination and use of sensitive information between parties, critical during the development of a product or when sharing and disseminating research, data, algorithms, plans, etc.  Since every trade secret and scenario is unique, an NDA should be tailored to match the particular confidential information it is trying to protect. Moreover, a poorly drafted NDA could lead to litigation or, worse still, disclosure of valuable information. In order to avoid the consequences which may arise from poor drafting it is important that the parties understand the clauses common to most NDA’s.

This article breaks-down typical NDA clauses as follows:

(a) What information is to be protected by the NDA?;

(b) How can this information be used and by whom?;

(c) How will the secrecy of this information be exchanged?;

(d) What consideration will be exchanged?;

(e) How long will the secrecy/restricted use obligations last?;

(f) What dispute resolution mechanism will be used if there is a dispute, and what law shall apply?; and

(g) What remedies will be available to the prevailing party in a dispute?


(a)  What Information Will Be Protected by the NDA?

The scope of the NDA is usually drafted in an expansive manner, to encompass categories of information and the embodiment of such information, as well as specific examples of protected information.  For example, broad categories, such as drawings, diagrams, notes, and memoranda may be included; however you may also wish to include more specific examples of documents that exist at the time of drafting or are reasonably likely to be created, such as plans, customer lists, and market research.

Another common feature of NDAs is a “carve out” for non-confidential information outside the scope of protection, which typically includes information:

  1. In the public domain at the time of such disclosure or which subsequently came into the public domain through no fault of the recipient;
  2. Known to the recipient in the ordinary course of business without any duty of confidentiality prior to such disclosure;
  3. Lawfully received by the recipient without any duty of confidentiality from a source other than the provider after the information had been disclosed by the provider;
  4. Independently developed by the recipient or by persons who did not have access to the confidential information; or
  5. Disclosed without restriction by or with the prior written consent of the provider.

If the information being disclosed does not fall within one of these categories, then it may be subject to protection under the agreement.

Because the courts have a tendency to narrowly interpret any of the terms that restrict the use of the proprietary information, the party seeking to protect confidential information should attempt to define that information as broadly as possible.

(b)   How Can This Information Be Used and By Whom?

This section typically defines how the confidential information will be protected and can be divided into three subparts. The first subpart of the agreement specifies how the information will be transferred from one party to the other. This ensures that the party receiving the information knows that it is receiving confidential information without having to read the documents to discern their nature. This also helps the parties ensure that only those persons authorized to use or review the confidential information have access to it.

The second subpart of the agreement typically sets forth how the information may be used by either party. If the NDA is unilateral, then the disclosing party will want to place as many restrictions and obligations on the recipient as possible. If it is mutual or bilateral in nature, then the parties may compromise on less restrictive but reasonably effective terms, as they will be bound to the same restrictions as the other party. Another reason to avoid over-burdensome restrictions is that the more restrictions placed on the use of the information, the more difficult and expensive it will be to efficiently use that information.

The final subpart places limitations on the parties that will have access to the disclosed information. When considering how this limitation will be drafted, the discloser should take into account the same factors as when determining how to restrict use.

(c)    How Will The Information Be Maintained?

This section differs from the restrictions on use (section “b”), because it relates to the storage of the information rather than the use. When drafting this clause it is important that the party seeking to restrict the use of the confidential information also has procedures in place to maintain the information’s secrecy.

(d)  What Consideration Will Be Exchanged?

This is simply what payment will be received in exchange for the promise of keeping the information confidential. Payment could include monetary and/or non-monetary promises. The party seeking confidentiality could outright pay for the promise that the recipient keep the information confidential. This monetary payment could include previous monetary obligations under other agreements. On the other hand, instead of paying money, the parties may exchange promises to maintain confidentiality if entering into a mutual NDA. The disclosing party could also exchange a promise in exchange for the NDA.

(e)    How Long Will The Secrecy/Restricted Use Obligations Last?

This clause is critical, since it determines how long the NDA obligations will survive beyond the period of time the parties are interacting. The term of the NDA will depend on what kind of information is being disclosed and is usually tied to the economic life of the information in question. This means that normally the parties agree that the information will be secret for the duration of their relationship and some reasonable time afterward.

(f)    What Dispute Resolution Mechanism Will Be Used And What Law Shall Apply?

This section of the agreement speaks to two issues: the means of resolving any disputes, and the state law that applies to the disputes arising out the NDA. Typically the parties may agree to mediation and/or arbitration proceedings in order to avoid both the cost of litigation and the adversarial nature of litigation. If negotiations fail, mediation gives the parties the opportunity to have a third-party help them reach an agreement. Arbitration is also an alternative to the court system and allows the parties to present their case to an arbitrator who hands-down a binding decision. Unless binding upon the parties, neither of these methods restrict the parties’ access to the court system.

The forum selection and choice of law clauses are usually written separately, but they also have an impact on how a dispute is resolved. Most parties agree in advance that in the event of a dispute they will submit to the jurisdiction and laws of a particular state. This means that if either party wants to bring a claim, it must do so in the state named in the agreement and that state’s laws will govern the decision of the court or arbitrator.

(g)   What Remedies Will Be Available To a Party in a Dispute?

The usual legal remedy for breach of an NDA is to sue for money damages. The parties may agree to certain damages in advance of a dispute, using a so-called “liquidated” damages clause which contains agreed-upon damages for breaches of the NDA.  However, given the very nature of secrets, in many instances it could prove difficult if not impossible to determine what reasonable damages actually are.  Hence, a common approach is to provide an acknowledgment that breaches cannot be cured by monetary damages alone; in such instances, the NDA may also provide for equitable relief in the form of temporary restraining orders and court-ordered injunctions that bar the breaching party from using or disclosing the confidential information.


            NDAs are often a best practice when dealings between parties involve sensitive and confidential information, such as trade secrets.   As with any agreement, there is no “one size fits all” approach. In order to best assure the NDA is enforceable, careful consideration should be given to the above factors – especially since the protection of ideas and trade secrets is inherently difficult.

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Compliance for Developers of Medical Applications and Software under HIPAA and Other Regulations Wed, 18 Dec 2013 22:45:31 +0000 By: Kaiser Wahab and Susanna Guffey

Information and data supplied by patients via smartphones and the Internet are poised to drastically lower costs associated with medical care and make it easier for doctors to treat patients, even remotely. However, developers should keep in mind the particular regulatory and compliance issues that arise when dealing with personal medical information.

This memo provides a brief overview of the legal framework and best practices that developers should heed. First, the memo discusses the handling of health information under the Health Insurance Portability and Accountability Act, commonly referred to as “HIPAA”. Second, the memo discusses potential Food and Drug Administration (FDA) regulation of certain medical applications or software that may also function as “medical devices.” Lastly, the memo discusses general concerns and best practices for mobile application or software developers.

 I. Health Insurance Portability and Accountability Act (HIPAA)

What companies are regulated by HIPAA?

HIPAA establishes the rules that the U.S. Department of Health and Human Services uses to regulate the transmission of protected health information (PHI). PHI is any individually identifiable health information that is held or maintained by a Covered Entity or their Business Associates (defined below). Examples include demographic information past, present or future physical or mental health or condition of the patient; information pertaining to payment of healthcare services; and genetic information.  For example, a mobile medical application that allows patients to transmit personal health information via their mobile devices would be handling PHI.

What is a Business Associate?

Any party that stores, processes or transmits protected health information is a “Business Associate” regulated under HIPAA. Business Associates work on behalf of Covered Entities, who provide medical services to the patient.  A Covered Entity includes health care providers, such as doctors and hospitals; health care plans and insurers; and health care clearinghouses, which are companies that process certain information, like billing services, for providers. Formerly, only Covered Entities were directly liable for privacy violations under HIPAA. A 2013 amendment to HIPAA makes Business Associates directly liable for HIPAA noncompliance.

Business Associates are required to implement certain policies and procedures to protect PHI from unintended disclosure. They are also responsible for ensuring that members of their workforce and subcontractors act in accordance with HIPAA. In the case of a mobile medical application, it is unlikely that network carriers would be considered subcontractors, even though they technically handle PHI transmitted through the application. The application developer should still fully disclaim this fact in its terms of use.

What does HIPAA require  of Business Associates?

Generally speaking, HIPAA requires Business Associates implement certain procedures to ensure the integrity of PHI. This includes specific administrative, physical and technical safeguards as follows.

Business Associates must undertake risk analysis and management policies to keep information protected and respond quickly should there be a privacy breach. Business Associates must implement security measures including firewalls, access controls, unique user identification and access tracking.  HIPAA also contains specific guidelines for using mobile devices to manage or transmit PHI including:

  • Password and user authentication;
  • Installing and enabling encryption;
  • Installing and activating remote wiping or remote disabling of data;
  • Disabling file sharing;
  • Enabling firewalls; and
  • Installing and keeping up-to-date security software.

What are the consequences of noncompliance?

HIPAA noncompliance can result in a hefty penalty. Business Associates can be penalized anywhere from $100 to $50,000 per violation. The amount of the penalty depends on whether the privacy violation was a result of “reasonable cause” or “willful neglect” on the part of the Business Associate.

Willful neglect is defined as the “conscious, intentional failure or reckless indifference to the obligation to comply with” the provisions of HIPAA and carries penalties upwards of $10,000. Reasonable cause, on the other hand, is defined simply as an act or omission that does not qualify as willful neglect. When evaluating noncompliance, the Department of Health and Human Services will also take into account a number of factors to determine the appropriate penalty. This includes the number of patients affected, the nature of the harm that occurred as a result of the privacy breach, whether the breach adversely impacted an individual receiving healthcare, the number of past violations and the size and financial condition of the Business Associate.

II. Food and Drug Administration (FDA)

Which mobile medical applications does the FDA regulate?

The FDA has chosen to regulate some medical applications and software, but not others, as further discussed below.  Certain mobile medical applications may qualify as “medical devices,” which fall under the FDA’s regulatory authority. The FDA is primarily concerned with applications intended to be used either (1) as an accessory to a regulated medical device; or (2) to transform a mobile platform into a regulated medical device. Examples include a device that assists diabetic patients in measuring and reporting glucose levels or an application that has the ability to measure the patient’s heart rate to monitor irregularities.

Certain applications that display, store or transfer medical device data in its original form may also be medical devices. However, the FDA considers these a lower threat because the functionality poses less of a risk to a patient’s safety if the application were to malfunction. Hence these applications face a lower compliance threshold than those that may directly affect a patient’s health.

Which applications are likely not regulated by the FDA?

Applications that “help patients document, show, or communicate potential medical conditions to health care providers” are not considered medical devices. Moreover, applications that serve solely as means for a patient to document or communicate potential medical information to their physicians are not medical devices. Accordingly, the FDA has operated on the notion these pose the lowest risk to patients and will merely exercise “enforcement discretion” over them.

The intended use and degree of risk posed to patients are what differentiate such applications from a “medical device” that stores or transfers medical information. Hence, applications that are marketed for diagnosis, treatment, mitigation or prevention of disease are typically deemed “medical devices.”

Applications that are deemed medical devices must be registered with the FDA and comply with the FDA’s requirements for medical devices. Non-medical device applications that fall under the FDA’s intent to exercise “enforcement discretion” do not have to follow these requirements, but the FDA highly encourages them to follow their “Quality System Requirements.”

The Quality System Requirements dictate that manufacturers of mobile medical applications have risk assessment and management policies similar to those required by HIPAA. They must also implement procedures to identify, analyze, correct and prevent any application-related causes of patient harm.

Tip: The FDA encourages application developers who are unsure whether or not they might fall under the FDA’s regulation to contact the FDA by phone at 301-796-7100 or 800-638-1041 or by email to Additionally, the FDA has set up a “Device Advice” website that can be found at:

III. Other Best Practices for Mobile Medical Application Developers

General Disclaimers

In addition, medical application developers should include certain disclaimers in their terms of use in order to avoid liability. The following disclaimers exemplars have been deployed by various developers accordingly:

  • The application is not intended for emergency medical use. In case of an emergency, users should contact 911.
  • Text messages are not encrypted. The use of text messaging to send information may be vulnerable.
  • No internet or cellular transmission is completely secure. Users should be wary before transmitting personal medical information.
  • Users are responsible for all costs associated with text messaging and data use. They are responsible for all bills from their service provider.
  • The application developer is not responsible for the user’s network carrier or any privacy violations made by the network carrier.


Personal information about children is governed by the Children’s Online Privacy Protection Act, which carries its own set of requirements and penalties. Application developers should include age verification as part of the sign-up process, to ensure their application is not being used by children.  However bear in mind, age verification is not foolproof. As a result, the terms of service should include a clear disclaimer that the application is not intended for use by children under the age of thirteen.

Privacy Policy and Terms of Use

If the medical application gathers private information about the user, including PHI under HIPAA, the developer should make disclosures in a written privacy policy. The privacy policy should include the developer’s compliance efforts under HIPAA; the use and disclosure of the user’s PHI; and the user’s rights under HIPAA.

PHI may be used and disclosed for the purposes of providing health care for the user and for the purposes of paying medical bills. Additionally, the law requires certain disclosures for the purposes of public health, safety, law enforcement and oversight. All of these potential uses and disclosures should be clearly explained in the terms of use.

HIPAA also requires that a Business Associate inform a user of his or her rights under the HIPAA provisions. Users have a right to request their own protected health information, inspect and amend it. Users also have the ability to personally lodge complaints about potential violations to the Secretary of Health and Human Services. The privacy policy for the medical application should include information on how to make a complaint.

In addition to gathering medical information, medical mobile applications will also gather information about users in order to set up their account, such as their age, name, gender, email address and other contact information. The application should clearly disclose what information is collected, how they use it, and when the information might be released to third parties.

IV. Unanswered Questions

Medical application developers should keep in mind that given the novelty of these applications, there are a number of remaining questions that have yet to be answered. Physicians, for example, continue to express concerns about the use of mobile applications for medical care, given the questions: 1) Who will be liable if a patient is harmed or misdiagnosed through the use of applications?; 2) Should physicians recommend a mobile application, will they have to write a prescription for its use?; 3) If a physician “prescribes an application,” how does he or she pick from numerous options available?; and 4) Will medical insurance cover the cost of medical applications, especially the more expensive ones?

Part of the uncertainty stems from the fact that medical providers do not yet know how to process patient-generated data. This data can be both voluminous and unreliable, since the doctor is unable to oversee the collection of the data. Until doctors and medical institutions establish best practices to process and use patient-generated data, many of these questions may remain unanswered.

V. Conclusion

Depending on how they are employed and marketed, medical applications that handle personal patient information may implicate a number of federal regulations and privacy concerns, including HIPAA and FDA compliance. While this memo has addressed some of these concerns, developers should keep in mind that these are merely a few of the issues that should be considered when developing a medical application.  As a result, developers should take time to contact the relevant authorities, like the FDA, and examine potential compliance issues.  In addition, developers should consult an attorney, due to the above regulatory complexity which can be exacerbated by the unique nature of each application.


For more information on exactly who qualifies as a business associate, a detailed list can be found at the Health and Human Services website:

For a helpful chart on who is and is not a Covered Entity, the federal government provides one here:

The “Health Information Technology for Economic and Clinical Health” amendment or HITECH Act was meant to update HIPAA to better address the use of electronic means to disseminate medical information. The text of the HITECH Act can be found here:

Section 160.310 covers the responsibilities of Business Associates. A breakdown of that section can be found here: For a short overview of these guidelines, this website provides an easy-to-read outline: – What are some other best practices?.

See 45 C.F.R. 160.401.

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Common Provisions of Independent Contractor Agreements for Intellectual Property Production Wed, 27 Nov 2013 18:11:10 +0000

By: Tommas Balducci, Kaiser Wahab

In this article we will explore the nuances of a particular type of agreement, the Independent Contractor Agreement for the production of intellectual property. We have previously discussed best practices and common elements of general commercial contracts. Contracts dealing with the creation of intellectual property differ from other Independent Contractor Agreements because their subject matter requires them to include both service and licensing terms in addition to standard production terms, and as such require a greater focus on the relationship created and the future use of the deliverables. In such agreements, the hiring party usually seeks to ensure that the subject intellectual property work or “deliverable” will be solely owned by the hiring party, and that it has sufficiently shielded itself from liability to the contractor and from any liability to any third parties based on the contractor’s actions. Sections or terms relating to the following issues should be carefully thought out and included in order to minimize the risk to the hiring party and increase the foreseeability of how future claims might be resolved.

Independent Contractor Status:

It is important to definitively establish the hired party’s status as an independent contractor. Simply calling a worker an independent contractor or entitling the contract as an “Independent Contractor Agreement” is not sufficient for this purpose. Among other factors, courts look to the method of payment to the worker, the tax treatment of the worker, whether or not the employer hires and payrolls the worker’s assistants, and the amount of control the employer holds over the worker. Consequently, including terms that properly reference these factors will help establish the worker’s status as an independent contractor. As an added precaution the agreement should state that the hiring party will not treat the contractor as an employee for federal or state tax purposes, and will not reimburse the contractor for costs unless they are explicitly provided for in the contract. The agreement should be clear that the parties do not intend to create an employment relationship, that the contractor is not an agent for the hiring party, and that the parties are indemnified from the consequences of the other party’s acts.

Other Relationship Issues:

When two entities work closely together a relationship is formed between the hiring party, and its staff, and the independent contractor, and its staff. With this in mind the parties should define the parameters of the relationship, to prevent the development of a situation which could cause potential harm. The contract should speak to whether or not the parties may publicize their relationship and to whether, and in what instances, they may use the other party’s trademarks. It is also prudent to include a clause that states neither party may solicit or hire the other’s employees.

The hiring party may also wish to prevent the contractor from using subcontractors or taking on additional employees to work on the deliverable without prior approval from the hiring party. To prevent any issues stemming from the contractor’s use of additional help, the Independent Contractor Agreement should establish that the hiring party does not wish to create any relationship with these subcontracting parties, and that the contactor indemnifies the hiring party from any claim that may result from the use of subcontractors.

Ownership and Rights:

Due to the creator’s status as an independent contractor, the intellectual property rights for the deliverable will vest in the contractor unless there is a written agreement in place stating otherwise.[1] In these instances, a “work-for-hire” clause is necessary. Such a provision can be drafted to provide for different arrangements including a complete transfer of ownership or a transfer of ownership reserving a license for the contractor to continue using the deliverable. The parties should also discuss and agree on who retains rights in any discoveries which occur in the course of work and who retains possession of research and development notes created during the course of work.

An often-overlooked consideration is to strategically choose the moment when these rights are transferred to the hiring party. Though dependent on the situation, the parties may wish for the rights to transfer at the completion of the work, after the first payment installment, or at some other set point along the way.

Representations and Warranties:

The hiring party should have the contractor warrant that it:

1)      possesses the requisite experience and skills to perform the work;

2)      shall perform its services an expeditiously and economically, and;

3)      is adequately financed and insured to provide the services required under the agreement.

The parties should guarantee their cooperation and agree that the hiring party has ultimate control over the creation of the work. The hiring party may also require the contractor to ensure that it will comply with all laws, licensing, and business requirements related to its service, including that the deliverable produced is non-defamatory; non-infringing on the privacy, publicity, and statutory or common law intellectual property rights of any third party; and does not violate any other third party’s rights.

Assignments and Licenses:

Often the creation of a deliverable, especially hardware and software deliverables, utilizes preexisting intellectual property. The rights in these properties may belong to the hiring party, the contractor, or another third-party. In cases where such preexisting property does not belong to the hiring party a license or assignment is necessary. The hiring party and contractor should discuss what preexisting properties might be used; the authority and duties of each party in obtaining third-party licenses and assignments; and the terms of licensing, mutual licensing, and assignment between the parties. If it is anticipated that property will be licensed, the contract should be clear on what happens those licenses in the event of breach or termination of the Independent Contractor Agreement.  

[1] Unless the deliverable is outside of the enumerated works which qualify under the definition of works-for-hire in 17 USC §101. Then it will vest in the independent contractor regardless of any contract that states it is a work-for-hire. This is why independent contractor agreements generally state that the contractor assigns the rights in the deliverable to the hiring party in the event it is not considered to be a work-for-hire.

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CLIENT ALERT: Ban on General Solicitation and Advertising for Private Offerings Lifted Mon, 21 Oct 2013 13:30:37 +0000 By Lauren Mack

Beginning on September 23, 2013, a provision of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) that lifts the 80-year-old ban on general solicitation and advertising for private offerings came into effect, allowing startups and other private companies to announce to the world that they are making a private offering under Rule 506(c) or 144A.

Pre-JOBS Act Regulation D Offerings

Regulation D contains Rules 504, 505, and 506, which provide exemptions from the requirement that securities be registered with the Securities and Exchange Commission (“SEC”). The most popular exemption under Regulation D is Rule 506(b), which allows issuers to raise an unlimited amount of funds from accredited investors and 35 non-accredited investors who have sufficient “knowledge experience in financial and business matters.” Rule 506 also prohibits an issuer from engaging in general solicitation or advertising, meaning that a company relying on this exemption cannot advertise that it is selling securities, such as by announcing the offering on its website or directly emailing potential investors it doesn’t already have a relationship with. Generally, companies engage broker-dealers or finders, who do have pre-existing relationships with investors, to help sell the securities.

The New Rule 506(c)

The amendment to Rule 506 creates a new exemption, Rule 506(c), which may be used by any issuer who wishes to generally solicit or advertise its security offerings. Under the new exemption, issuers may generally solicit and advertise to potential investors if:

  • The issuer takes reasonable steps to verify that the investors are accredited investors under Rule 501 of Regulation D, and
  • All purchasers of the securities are accredited investors or the issuer reasonably believes that the investors are accredited at the time of the sale of the securities.

To fulfill the “reasonable steps” requirement, the issuer must consider the facts and circumstances of each purchaser and the transaction. The SEC has created a non-exclusive list of factors that issuers should consider in making their determination:

  • The nature of the purchaser and the type of accredited investor that the purchaser claims to be;
  • The amount and type of information that the issuer has about the purchaser; and
  • The nature of the offering, such as the manner in which the purchaser was solicited to participate in the offering, and the terms of the offering, such as whether it requires a minimum investment amount.

The SEC has clarified that requiring potential investors who are solicited via a website or an email to the general public to check a box or sign a form affirming their accredited investor status would not constitute reasonable steps without the issuer obtaining further information about the purchaser to confirm that he or she is an accredited investor. But if the amount of the minimum investment required is so high that only accredited investors could reasonably be expected to meet it, then it may be reasonable for the issuer to take no further steps to verify that the investor is accredited beyond confirming that the purchaser’s cash investment is not being financed by the issuer or a third party.

The SEC has also provided a non-exclusive list of actions issuers can take to verify accredited investor status that would qualify as “reasonable steps”:

  • Review copies of Internal Revenue Service documentation of reported income for the two most recent years demonstrating that a person meets the income test in the definition of accredited investor and obtain a written representation from such person that he or she has a reasonable expectation of reaching the necessary income threshold during the current year;
  • Review specified documentation dated within the prior three months to confirm assets and liabilities showing that a person meets the net worth test in the definition of accredited investor and obtain a written representation from such person that all liabilities necessary to make a determination of net worth have been disclosed;
  • Obtain written confirmation from a third party (such as a registered broker-dealer, SEC-registered investment adviser, licensed attorney or certified public accountant) that it has verified the person’s accredited investor status within the prior three months; and
  • Obtain a certification from an existing investor who previously invested in the issuer’s Rule 506(b) offering prior to the effective date of Rule 506(c) and who remains an investor of the issuer.

The provisions of Rule 506(b) remain unchanged, and the exemption will still be available to issuers who decide not to generally solicit or advertise. To better understand the differences between the two Rule 506 exemptions, below is a chart comparing the provisions of the Rule 506(b) and Rule 506(c):

Rule 506(b) Rule 506(c)
General solicitation and general advertising permitted



Number of accredited investors who may invest



Number of non-accredited investors who may invest



Reasonable steps required to be taken by issuers to verify purchasers are accredited investors



Information must be given to non-accredited investors by issuer




Disqualified Persons under Rule 506(d)

The newly adopted rules also prohibit offerings involving “felons and other ‘bad actors’” from relying on the Rule 506 exemptions if a disqualifying event occurs after the rule’s effective date. The disqualifying events listed in Rule 506(d) are:

  • Criminal convictions related to securities offerings or SEC filings;
  • Court injunctions and restraining orders related to securities offerings or SEC filings;
  • Final orders of federal and state regulators;
  • SEC disciplinary orders;
  • SEC cease-and-desist orders;
  • Suspension from securities self-regulatory organizations;
  • SEC stop orders and Regulation A exemption suspensions; and
  • U.S. Postal Service false representation orders.

If a disqualifying event occurred within the relevant time period before the amended rule became effective, it must be disclosed to purchasers before a sale is made, unless the issuer establishes that even after exercising “reasonable care” it did not know and reasonably could not have known of the existence of the disqualifying event. Therefore, issuers relying on Rule 506 must conduct diligence into the backgrounds of all relevant persons involved in the offering.

The Amendments to Rule 144A

Rule 144A provides an exemption from the registration requirements under the Securities Act by permitting the offer or sale of an unlimited amount of securities by a person other than an issuer to an unlimited number of Qualified Institutional Buyers (“QIB”) or to any person whom the seller and any person acting on behalf of the seller reasonably believe is a QIB. The amendments made to Rule 144A pursuant to the JOBS Act provide that general solicitation and advertising is permitted for securities sold under Rule 144A, provided that they are only sold to QIBs.

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Intellectual Property Considerations for Crowdfunding Wed, 16 Oct 2013 18:43:39 +0000 By Susanna Guffey, Lauren Mack, and Kaiser Wahab

Crowdfunding portals like Kickstarter and Indiegogo are now prime funding options for every manner of venture, from artists, to entrepreneurs, to mature companies.  However, for ventures where intellectual property is mission critical, jumping into crowdfunding without careful planning may cause significant harm. Even worse, lack of planning can result in losing intellectual property rights to the public domain.

Let’s take a hypothetical start-up that has a prototype diabetes smartphone app and device – we’ll call it MedCo. In order to fund production of a proof of concept unit, MedApex needs money. Leveraging Kickstarter seems to be an attractive option, as MedApex will be able to reach a wide audience in very little time. But, by putting its idea on Kickstarter, it will be viewable by anyone who is able to access its project page.

The following is a breakdown of the intellectual property considerations MedApex should keep in mind before announcing its idea to the world via a crowdfunding campaign:

Protect Patent Novelty by Filing a Patent Application

The first thing that MedApex may want to do is file a patent application. In order to be patentable, MedApex’s invention would have to fit the requirements of patentability, including the condition that it be novel. What happens to the invention’s novelty when it is published on the Internet, even if only to raise funds for research and development?

An invention is no longer novel if it is publicly known before the patent application has been filed. The court in In re Hall, 781 F.2d 897 (Fed. Cir. 1986) held that public knowledge occurs when the invention becomes available to one or more members of the public. Very likely, posting an invention, whether in the form of a technical drawing or a description, on the Internet would constitute exposure to the public.

One solution to this problem might be for MedApex to limit what it posts on the crowdfunding portal. However, it should be aware that crowdfunding portals have guidelines on what can and cannot be posted in order to not be misleading to potential funders. For example, Kickstarter requires details about the state of the product’s development, the product’s current functionality, and an estimated timeline. While MedApex may want to reveal less about its product to avoid running the patent clock or someone else taking its idea, crowdfunding portals have a competing interest in avoiding fraud and preventing users from misleading potential funders.

Offering a Product via a Crowdfunding Portal May Lead to a Patent Infringement Lawsuit

MedApex not only needs to be concerned about its patents being infringed upon, but also infringing upon the patents of others. A recent Virginia case demonstrates the potential for parties to be liable for patent infringement based upon their crowdfunding activities. In Robinson v. Bartlow, 2013 U.S. Dist. LEXIS 42677 (W.D. Va. March 22, 2013), a patent-holder brought suit against a party who linked a Kickstarter page to their Facebook profile in order to raise funds for a product substantially similar one already patented. The basis for the claim was that the defendants were soliciting funds and exchanging products as reward for contributions.

Ultimately, the court determined that the plaintiff lacked personal jurisdiction over the defendants because they had not specifically targeted Virginia in their fundraising efforts and only three funders resided in the state. However, the case demonstrates that offering a potentially infringing product as reward for a non-equity crowdfunding campaign could be enough to infringe a patent-holder’s rights.

Hence, before posting anything to a crowdfunding portal, MedApex should examine the prior art. This means that MedApex should look to see what has already been patented and what is already known by others that may be similar to its product. This will help MedApex avoid patent infringement liability in the future.

Don’t Forget About Copyright

MedApex might also own the copyright in the photos and drawings used to illustrate its app and device. Original artistic works are protected by copyright the moment they are created, and MedApex should make sure it has work-for-hire or copyright assignment agreements with all of its contractors.

In addition to concerns about third parties appropriating its content, MedApex should also ensure that it is not infringing on someone else’s copyright. Kickstarter and other crowdfunding portals adhere to the takedown provisions outlined in the Digital Millennium Copyright Act (“DMCA”). This means that if another user notifies Kickstarter that an image, video clip, or other copyrighted work was uploaded by MedApex onto its Kickstarter page, Kickstarter will remove the offending content. The copyright owner could also choose to file a lawsuit against MedApex for infringement. This means that before posting any material to a crowdfunding portal, MedApex should make sure it has the right to use it.

Finally, MedApex should secure copyright registrations with the United States Copyright Office on its own materials, which will afford MedApex additional protections, including the ability to seek statutory damages (i.e. a set amount of damages, irrespective of the actual monetary harm the infringer did or did not cause) and attorneys’ fees against an infringer. For example, if MedApex posts device drawings to the crowdfunding portal that are subsequently infringed, the failure to secure copyright in those drawings beforehand could restrict the type and amount of damages MedApex can seek (such as statutory damages). Moreover, the absence of statutory damages may render the threat of a copyright suit by MedApex “toothless”.

Beware of Disclosing Trade Secrets

MedApex should also be concerned about posting information online that would otherwise qualify as a trade secret. A trade secret is information that derives its value from not being generally known. A trade secret is often something that makes a company’s product or service better than a competitor’s and the competitor has yet to discover it. This may be a formula, a device, or even a recipe. A trade secret is also subject to reasonable efforts to maintain its secrecy. If, in order to market its new product on a crowdfunding portal, MedApex has to show drawings or information it has not released to the public in order to meet the portal’s requirements, any trade secrets contained within them would lose protection.


When considering whether or not to undertake a crowdfunding campaign, companies should carefully consider the impact it may have on its ability to protect its intellectual property. Companies that determine crowdfunding is right for them must decide what disclosures are necessary to meet the requirements of the fundraising portal and to attract potential backers to their project, while taking care to not forfeit their intellectual property interests or infringe on a third party’s rights in the process.

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Trademarks and What it Really Means to Be FAMOUS. An Analysis. Wed, 02 Oct 2013 13:30:54 +0000 Famous marks qualify for protection under the federal anti-dilution statute, see 15 U.S.C. § 1125(c).  In most cases, trademark dilution involves an unauthorized use of another’s trademark on products that do not compete with, and have little connection with, those of the trademark owner.  So for example, a famous trademark used by one company to refer to apparel might be diluted if another company began using a similar mark to refer to pet food.  If the mark is not famous, then an owner must demonstrate that the allegedly infringing use creates a likelihood of confusion as to the source of the product or service being identified by the allegedly infringing use.  In other words, where the mark is not famous, it is highly unlikely that there is likelihood of confusion if the products or services are in unrelated markets.

But the famous mark argument is not without boundaries.  Even if a mark is famous throughout Europe and Asia, for example, with multiple retail outlets, numerous press mentions and so forth, that “it” factor is useless in a U.S. court if the mark is not used in the U.S.  This has caused much confusion to foreign trademark owners relying upon the famous foreign marks doctrine (or the “famous mark doctrine”) to support their infringement argument.  According to McCarty, the “famous marks” doctrine is, in fact, a different and distinct “legal concept under which a trademark or service mark is protected within a nation if it is well known in that nation even though the mark is not actually used or registered in that nation.”  J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 29.2, at 29-164 (4th ed. 2002).  Much to the chagrin of foreign mark owners, the “famous marks doctrine” has been expressly rejected in the Second Circuit as inconsonant with the territoriality principle.  ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 150-65 (2d Cir. 2007).

Indeed, in ITC v. Punchgini, plaintiffs tried to use the famous mark doctrine argument to revive an abandoned park.  There, Plaintiffs held a registered U.S. trademark for restaurant services: “Bukhara.”  Three years after plaintiffs ceased using the mark in the United States, they sought to register the Dal Bukhara mark.  Prior to that, defendants had opened the Bukhara Grill restaurant.  Plaintiffs sued defendants for trademark infringement, unfair competition, and false advertising in violation of federal and state law.

The court found in defendants’ favor on plaintiffs’ infringement and federal unfair competition claim because it found that plaintiffs had abandoned their mark.  The abandonment doctrine derives from the well-established principle that trademark rights are acquired and maintained through use of a particular mark. See Pirone v. MacMillan, Inc., 894 F.2d 579, 581 (2d Cir. 1990) (“‘There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed.’” (quoting United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S. Ct. 48, 63 L. Ed. 141, 1918 Dec. Comm’r Pat. 369 (1918))). This is true even of marks that have been registered with the Patent and Trademark Office. See Basile, S.p.A. v. Basile, 283 U.S. App. D.C. 227, 899 F.2d 35, 37 n.1 (D.C. Cir. 1990) (“Although [a mark's] registration is a predicate to its protection under [section 32(1)(a) of] the Lanham Act, the underlying right depends not on registration but rather on use.”).  Indeed, one of the fundamental premises underlying the registration provisions in the Lanham Act is that trademark rights flow from priority and that priority is acquired through use. See, e.g., 15 U.S.C. § 1057(c) (stating that registration of mark “shall constitute constructive use of the mark, conferring a right of priority, nationwide in effect . . . against any other person except for a person whose mark has not been abandoned and who, prior to such filing[,] . . . has used the mark”). Thus, so long as a person is the first to use a particular mark to identify his goods or services in a given market, and so long as that owner continues to make use of the mark, he is “entitled to prevent others from using the mark to describe their own goods” in that market. Defiance Button Mach. Co. v. C & C Metal Prods. Corp., 759 F.2d 1053, 1059 (2d Cir. 1985); see also Sengoku Works v. RMC Int’l, 96 F.3d 1217, 1219 (9th Cir. 1996) (“It is axiomatic in trademark law that the standard test of ownership is priority of use.”).

If, however, an owner ceases to use a mark without an intent to resume use in the reasonably foreseeable future, the mark is said to have been “abandoned.” See Silverman v. CBS, Inc., 870 F.2d 40, 45 (2d Cir. 1989); 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 17:5, at 17-8 (4th ed. 2002) (observing that “abandonment” refers to situations involving the “non-use of a mark, coupled with an express or implied intention to abandon or not to resume use”). Once abandoned, a mark returns to the public domain and may, in principle, be appropriated for use by other actors in the marketplace, see Indianapolis Colts, Inc. v. Metro. Baltimore Football Club Ltd. P’ship, 34 F.3d 410, 412 (7th Cir. 1994), in accordance with the basic rules of trademark priority, see Manhattan Indus., Inc. v. Sweater Bee by Banff, Ltd., 627 F.2d 628, 630 (2d Cir. 1980).

And that was precisely the weakness in plaintiffs’ argument; they could not demonstrate use in the U.S.  Despite this fact, plaintiffs argued that use in the U.S. was not necessary because they did not abandon their mark due to their continued use of the Bukhara mark outside of the United States – giving rise to an inference of an intent to resume the mark’s use in this country (a reference to the “famous mark doctrine” – which you now know, does not exist in the 2nd circuit).  The court summarily rejected this argument, citing to La Societe Anonyme des Parfums le Galion v. Jean Patou, Inc., 495 F.2d 126, 1271, no. 4, noting that it is “well-settled” view “that foreign use is ineffectual to create trademark rights in the United States.”

The lesson of the story is: no matter how famous you are overseas, it does not carry much weight here unless you do your homework.  Note to self, register early.

If you have any questions regarding famous marks, contact Olivera Medenica at

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Outline of New York and Federal Privacy Lawsuit Causes of Action Fri, 27 Sep 2013 13:30:23 +0000 Given that privacy law is now at the forefront of any business operation, having a high level view of the various privacy based lines of attack a party can direct at your venture is critical. So our firm prepared this simple outline of privacy lawsuit causes of action. Being familiar with them can prove useful for risk management and prevention.

Download PDF here.


    1. Invasion of Plaintiff’s name or likeness in advertising
      1. Also referred to as: Misappropriation, Right to Publicity
      2. Common Law
        1. Elements
          1. Use of name or likeness
            1. Must be the plaintiff and plaintiff must be able to show he or she was the person referred to in the advertising.
          2. Without Consent
            1. Consent is a complete defense. However, known persons, celebrities, etc., do not waive their right to publicity by virtue of being famous.
          3. To Imply Endorsement of Defendant’s Product
            1. In New York, the activity must be an advertisement for the purpose of financial gain,
              1. New York has a Statutory Right to Recover
            2. Courts have held in other jurisdictions that infringement may occur even if activity is not for profit, but is simply for defendant’s own benefit.
      3. Recent New York Cases
        1. Apakporo v. Daily News, 102 A.D.3d 814, 958 N.YS.2d 445 (2013).
          1. Holding: Defendant’s action did not constitute misappropriation because Plaintiff failed to show that his photo was used for advertising or trade purposes.
          2. Facts: Daily News published a photo of the plaintiff alongside an article regarding a real property transaction involving the plaintiff. Plaintiff could not show that article was connected to an advertisement as required by N.Y. Civil Rights Law §50.
        2. Krupnik v. NBC Universal, Inc., 37 Misc.3d 1219(A), 964 N.Y.S.2d 60 (2010).
          1. Holding: Complaint dismissed for failure to state cause of action because Plaintiff signed a release of her image for “any and all purposes,” including commercial use and expressly waived claims for misappropriation of the right of privacy and publicity, even though Defendant was not a party to the release.
          2. Facts: Plaintiff was a model who took photos for “” and signed a release for use of her photo for “any and all” purposes including commercial use. Defendant, NBC, used Plaintiff’s image in a fake brochure in the film Couples Retreat. Plaintiff’s release barred her claim even though she did not expressly authorized the use of her photo by NBC or in the film, nor did it matter that NBC was not party to her release.
        3. Compare: Yasin v. Q-Boro Holdings, LLC, 27 Misc.3d 1214(A), 910 N.Y.S.2d 766 (2010).
          1. Holding: Plaintiff granted a permanent injunction against Defendant’s use of her photograph on a book cover because there was no relationship between plaintiff and the subject matter of the book and the use was solely for marketing and trade purposes without the plaintiff’s permission.
          2. Facts: Plaintiff’s photo was used on the cover of a book jacket without her permission. While Plaintiff had hired a photographer to take her picture for purposes of promoting her songwriting career, she never signed a release. Defendant could not rely on the constitutionally-protected exception for “work of art” because the court did not consider the photo on the book jacket a work of art, but rather was purely for marketing and trade purposes.
    2. False Light
      1. Elements
        1. Publicity
          1. Meaning, public at large, rather than “publication” as required by Defamation, to a third person
        2. Of a Major falsehood
          1. Note: If substantially true, the defendant is not liable for not having cast the plaintiff in the most favorable light
        3. About the Plaintiff
          1. The Plaintiff must be reasonably identifiable from the private facts disclosed
        4. That Would Be Highly Offensive to a Reasonable Person
          1. Objective standard, does not protective the hypersensitive plaintiff
      2. Application to New York
        1. New York does not recognize a tort of “false light.” New York only recognizes cases for defamation and for misappropriation.
          1. See Howell v. New York Post Co., Inc., 81 N.Y.2d 115, 596 N.Y.S.2d 350 (1993): “While courts of other jurisdictions have adopted some or all of these torts, in this State the right to privacy is governed exclusively by sections 50 and 51 of the Civil Rights Law; we have no common law of privacy.”
    3. Intrusion
      1. Elements
        1. Intentional Intrusion
          1. Defendant must “intend as a result of his conduct that there be an intrusion upon another’s solitude or seclusion”
        2. Upon the Solitude or Seclusion of another that is
          1. Must be an expectation of privacy, not matters that occur in a public place or in the public eye
        3. Highly Offensive to a Reasonable Person
          1. Same standard as above
      2. Application to New York
        1. As previously stated, New York does not recognize a common law cause of action for intrusion. See also Ava v. NYP Holdings, Inc., 20 Misc.3d 1108(A), 866 N.Y.S.2d 90 (2008) (Plaintiff unable to state a cause of action for invasion of privacy because New York does not recognize other common law actions of privacy).
          1. In some cases however, plaintiff may be able to establish a claim for Intentional Infliction of Emotional Distress, which in New York, has the following elements:
            1. Extreme and outrageous conduct;
            2. Intending to cause OR disregarding a substantial probability of causing, severe emotional distress;
            3. Causation;
            4. Plaintiff suffers Severe emotional distress.
          2. Like most claims for IIED, difficult to meet standards. See, i.e., Michael S. Oakley, M.D., PC v. Main Street America Group, 40 Misc.3d 1204(A) (N.Y. Sup. 2013) (Plaintiff’s claim dismissed for failure to show defendant’s conduct was intentional. Plaintiff stated in affidavit she misconstrued defendant’s conduct) and Curtis-Shanley v. Bank of America, 109 A.D.3d 634 N.Y. Sup. 2013) (Plaintiff failed to establish Defendant-bank’s denial of credit was so extreme in degree to go beyond all bounds of human decency.)”
    4. Public Disclosure of Private Facts
      1. Elements
        1. Publicity
          1. Same as “False Light,” more than just mere dissemination to another
        2. Of Private Facts
          1. Facts exposed were “kept hidden from the eye”
        3. About the Plaintiff
          1. Like “False Light,” Plaintiff also must be reasonably identifiable
        4. That would be highly offensive to a reasonable person
          1. Same standard as above
      2. Application to New York
        1. As stated above, is not recognized in New York. In Griffin v. Law Firm of Harris, Beach, Wilcox Rubin and Levey, the court concludes that the legislature did not intend to include in Civil Rights Law §50 any of the other privacy torts not concerning appropriation, including, use of plaintiff’s name or information for non-commercial uses.
    5. Relation to Other Laws
      1. Communications Decency Act, §230(e)
        1. Bars intrusion upon seclusion, public disclosure of private fact and false light claims.
    1. Privacy Act of 1974
      1. General Provisions
        1. Prevents disclosure by government to third parties
        2. Allows individuals to file requests for own information
        3. Suits are brought against government agencies
          1. Employees are subject to both civil and criminal for unlawful disclosure
          2. Subject to certain exemptions
            1. Investigatory material for law enforcement purposes
            2. Investigatory material for purpose of determining employment suitability
            3. Other evaluation purposes for federal and military employment
            4. Other purposes as required by statute
      2. Privacy Act Litigation
        1. Causes of Action (Civil Remedies §552a(g))
          1. Damages for Violation of Prohibition of Disclosure
            1. Elements
              1. Information from a record covered by the Act
              2. Agency disclosed the information
              3. Disclosure had an adverse effect on Plaintiff
              4. Disclosure was willful or intentional
            2. Cases
              1. Bechhoefer v. U.S. Dept. of Justice D.E.A., 209 F.3d 57 (2nd Cir. 2000), holding that letter written by a member of a land use group to the Drug Enforcement Agency was a “record” within the meaning of the Privacy Act, in sum, “record” is meant to be construed broadly. Letter here contained personal information about the officer.
              2. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122 (2nd Cir. 2008), holding that a third party collection company is not an agency of the government subject to civil suits under the Privacy Act.
              3. Pennyfeather v. Tessler, 431 F.3d 54 (2nd Cir. 2005), holding that (1) Privacy Act does not give Plaintiff a cause of action against a municipal or state employee and (2) information that is related to public employment and that is not highly personal, including plaintiff’s name, address, work schedule and social security number during an employment hearing, does not violate Plaintiff’s privacy.
          2. Actions Where Agency Denies a Right of Access Granted Under the Act
            1. Individuals are granted certain rights under the act in §552(a)(d)(1)
              1. Rights
                1. Amend information under the Act
                2. Gain access to own information including
                  1. Record under the Act or
                  2. Any information pertaining to the individual under the Act
              2. Judicial Review
                1. After an individual has made a request and been denied to either amend information or request information,
                2. Right to review,
                3. If after review, request is still denied, individual has a right to judicial review.
                4. Cause of Action
                  1. According to Zeller v. U.S., 467 F.Supp 487 (1979), Petitioner must merely show:
                  2. (1) Individual within the meaning of the act;
                  3. (2) Type of request guaranteed under the Act was denied.
              3. Recent Cases
                1. Public Employees for Environmental Resp. v. U.S. Environemtal Protection Agency, 2013 WL 677672, holding that organizations and corporations do not have rights under the Privacy Act.
                2. Bickford v. Government of U.S., 808 F. Supp.2d 175 (D.C. Cir. 2011), holding that before seeking judicial review under the Privacy Act, a Plaintiff must first exhaust administrative remedies.


          1. Remedies
            1. Actual Damages
              1. Available for intentional or willful violations of the Act
                1. Includes special damages for proven pecuniary loss.
                2. But not damages for mental or emotional distress.
                3. See, specifically F.A.A. v. Cooper, 132 S.Ct 1441 (2011), holding that while Privacy Act does allow for actual damages, it dos not include damages for civil or emotional distress.
            2. Costs of the Action, including reasonable attorney’s fees
              1. When Plaintiff proves “intentional and willful acts” on behalf of agency
    1. Computer Matching and Privacy Protection Act of 1988, Amendments 1990
      1. First Amendment to the Privacy Act to include automated (computerized) records
        1. Bring non-federal agencies within the ambit of the Privacy Act when working with a federal agency
      2. Purpose to create procedural uniformity by
        1. Setting out specific guidelines for agencies to follow when engaged in automated, computer matching activities
          1. Computer matching:  a computerized comparison of two or more automated system of records, or one system of records with non-Federal records, generally for the purpose of determining eligibility for federal programs or recouping payment under those federal programs)
          2. No record in these systems may be disclosed unless:
            1. Written agreement between source and recipient agency
              1. Specifying purpose and legal authority for use of record
              2. Including justification
              3. Description of records to be matched
              4. Procedure for providing notice to applicants of Federal benefits programs
              5. Procedures for verifying any info obtained
              6. How the info will be retained, and then destroyed
              7. Prohibits duplication and/or redisclosure of information obtained
              8. Information regarding accuracy of records to be used
              9. Gives Comptroller General access to all records to monitor compliance.
      3.  in access of automated records and
        1. Provide Due Process for subjects of automated records
        2. Provide guidelines (oversight) to non-federal agencies working on behalf of or in conjunction with federal agencies
      4. Requirements
        1. Approval of a written agreement
        2. Notice to any record subjects
        3. Prepare a report to Congress and/or a Federal Register Notice
    1. Children’s Online Privacy Protection Act (1998)
      1. Summary: Unlawful to collect personal information from a child. Sets standards by which operators of websites and online services must comply if:
        1. Targeted at children under the age of 13; and
        2. Operated with actual knowledge that they are collecting, using, disclosing personal information from children under the age of 13.
      2. Requirements
        1. Post a clear online privacy policy;
        2. Post a direct notice to parents and obtain parental consent;
        3. Give parents a choice of whether or not to disclose information;
        4. Give parents an opportunity to review any personal information;
        5. Give parents opportunity to prevent use of child’s personal information;
        6. Take steps to maintain confidentiality of any provided personal information; and
        7. Retain personal information only as long as necessary, then delete.
      3. Amendments
        1. Rule amended July 2013, adding new categories to personal information
          1. Geolocation information
          2. Photos or videos with child’s image or voice
          3. Screen name or user name
            1. If it functions in the same manner as online contact information
          4. Persistent Identifiers
            1. “That can recognize users over time and across different websites or online services, where such persistent identifiers is used for functions other than or in addition to support for internal operations of the website or online service.”
              1. Gives examples of cookies, gather IP addresses.
    2. Electronic Communications Privacy Act
      1. Protects designated privileged communications, thus expanding the Wiretap Act:
        1. Electronic communications, including:
          1. Video
          2. Text
          3. Audio
          4. Data
        2. Elements
          1. Any person who
            1. Includes both government agents and any individuals, companies or corporations
          2. Intentional interception or attempted interception
            1. Inadvertent conduct not enough
          3. Of electronic communications
            1. See “privileged communications” above
          4. That is not specifically authorized
      2. Penalties
        1. Criminal
          1. Not more than 5 years or $250,000 for individuals; $500,000 for organizations
        2. Civil
          1. Plaintiff may be entitled to equitable relief and damages including:
            1. Punitive damages, reasonable attorneys’ fees and litigation costs
            2. Equal to the greater of:
              1. Actual damages ($100 per day of violation) or
              2. $10,000
      3. Second Circuit Cases
        1. United States v. Jiau, 794 F.Supp.2d 484 (S.D.N.Y. 2011), holdings that a co-conspirator’s consent to recording telephone conversations and instant messaging was sufficient consent for defendant and was not a violation of §2511.
        2. DeVittorio v. Hall, 347 Fed.Appx. 650 (2nd Cir. 2009), holding that a video recorder placed in police officers’ locker room did not violate ECPA, because there was no evidence the video recorder was used to record their conversations.
      4. Stored Communications Act
        1. Similar to first section of the ECPA above, protects:
          1. Email, voicemail, and the similar
        2. Elements
          1. Intentionally accessing;
          2. Without authorization or having exceeded authorization;
          3. A facility through which an electronic communication is provided; and
          4. Obtaining or altering or preventing access to
          5. A communication while it is in the storage system.
            1. Courts differ on what is included in the definition of a “storage system”
              1. Defined in the statute as “any temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and . . . any storage of such communication . . . for purposes of backup protection of such communication.”
              2. Ex: Debatable whether employee’s emails on a company server constituted a storage system.
        3. Penalties
          1. Similar to EPCA penalties listed above. Persons liable for breach are exposed to both civil and criminal penalties.
      5. Update: Recent federal court cases indicate this may also cover non-public Facebook posts
          1. Dependent on the privacy settings the user has chosen.
      6. More Recent Cases
        1. Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (S.D.N.Y 2008), holding that an employer’s access of employee’s personal emails, stored and accessed and directly maintained by an outside electronic communication service provider and unauthorized by the employees, violated the SCA, and that each account accessed was a singular violation of the SCA (Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, 759 F.Supp.2d 417 (S.D.N.Y. 2010).
        2. Conte v. Newsday, Inc., 703 F. Supp.2d 126 (E.D.N.Y. 2010), holding that a route distributor of emails cannot “intercept” communications as required by SCA, because they are the intended recipients.
      7. New York’s Privacy Statute includes access of electronic communications.
    3. Proposed Amendments (2013)
      1. Amends 1986 Act (see above)
        1. Prohibits the provider of (1) remote computing service or (2) electronic communication service from
        2. Knowingly disclosing to any governmental entity contents of a communication either (1) in electronic storage or (2) otherwise maintained by provider
      2. Status
        1. Act introduced: Mar. 19, 2013 by Sen. Patrick Leahy
          1. Co-Sponsors: Mike Lee, Rand Paul, Mark Udall
        2. Status: Reported by Committee on April 25; Referred to Senate Judiciary on May 7.
      3. Expands the warrant requirement for government agencies.

Shamsky v. Garan, Inc., 167 Misc. 2d 149, 632 N.Y.S.2d 930 (Sup. 1995).

Palmer v. Schonhorn Enterprises, Inc., 96 N.J. Super. 72 (Ch. Div. 1967).

Cardy v. Maxwell, 169 N.Y.S.2d 54 (Sup. 1957).

See McKinney’s Civil Rights Law § 50: “A person, firm, name or corporation that uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person . . . .”

See Restatement (Second) of Torts §652C, comment b (1997).

McKinney’s, supra note 4, states, “A person, firm or corporation that uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person, or if a minor of his or her parent or guardian, is guilty of a misdemeanor.”

Anderson v. Fisher Broadcasting Companies, Inc., 300 Or. 452, 712 P.2d 803, 809 (1986); also means more than simply “gossip”.

Machleder v. Diaz, 801 F.2d 46, 55 (2d Cir. 1986).

Bernstein v. National Broadcasting Co., 129 F.Supp. 817 (1955).

See Bitsie v. Walston, 85 N.M. 655 (1973).

Knight v. Penobscot Bay Medical Center, 420 A.2d 915, 918 (Me. 1980).

Fogel v. Forbes, Inc., 500 F. Supp. 1081 (1980).

Ava v. NYP Holdings, Inc., 20 Misc. 3d 1108(A), 866 N.Y.S.2d 90 (2008), citing Howell v. New York Post Co., 81 N.Y.2d 115, 122 (1993).

See Fry v. Ionia Sentinel-Standard, 101 Mich. App. 725, 300 N.W.2d 687, 690 (1980); because Plaintiff has no reasonable expectation of privacy of facts open to the public.

Griffin v. Law Firm of Harris Beach, Wilcox, Rubin and Levey, 126 Misc.2d 209, 481 N.Y.S.2d 963 (1984).

See Doe v. Friendfinder Network, Inc., 540 F. Supp. 2d 288, 302-4, 36 Media L. Rep. (BNA) 1577, 86 U.S.P.Q.2d 1294, 2008 DNH 58 (D.N.H. 2008). Specifically, these claims were barred in a case involving a fabricated personal ad.

5 U.S.C.A. § 552a.

Quinn v. Stone, 978 F.2d 126 (1992).

Id. at § 552a(o).

5 U.S.C. §552a(o)

See 16 CFR part 312, available at

18 U.S.C. §2511(2)(g).

18 U.S.C. 2510(6).

18 U.S.C. 2511(1).

18 U.S.C. 2511(4)(a).

18 U.S.C. 2520(b),(c).

18 U.S.C. 2701(a); see also, State Analysis, Inc. v. American Financial Services Ass’n, 621 F.Supp.2d 309, 317-18 (E.D.Va 2009).


See KLA-Tencor Corp. v. Murphy, 717 F.Supp.2d 895 (N.D. Cal. 2010).

See Ehling v. Monmouth-Ocean Hospital Service Corp., available at Here the plaintiff had chosen settings that made her page inaccessible, except to her selected friends.

N.Y. Penal Law §250.05.|/home/LegislativeData.php|

See “Electronic Communications Privacy Act Amendments Act of 2013,” available at, last visited Sep. 3, 2013.

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