Useless But Compelling Facts - March 2014 Answer

Our last trivia question (UBCF) asked what connection storm and hurricanes have with the Beatles.

In August of 1962, The Beatles replaced drummer Pete Best with Ringo Starr (born Richard Starkey), a drummer who was with another popular local group known as Rory Storm & the Hurricanes. In September of 1962, Ringo Starr had been with the Beatles for only a few weeks when they recorded their first double-side singles recording - two songs written by Lennon-McCartney entitled "Love Me Do" and "P.S. I Love You".

Useless But Compelling Facts - Question for March 2014

Most people associate storms and hurricanes with weather and natural disasters, but one storm and some hurricanes have a relationship to The Beatles way back in the early 1960s.  Can you guess the connection?

Social & Mobile & Clouds, Oh My!

Joe Rosenbaum recently authored an article that has been published in the Small Business Journal highlighting some of the key issues that have arisen for small to medium-size businesses as a result of the emergence and convergence of these rapidly evolving technological platforms. Joe’s article, "Social & Mobile & Clouds, Oh My!" appears in the March 2014 issue of the Small Business Journal, and you can read "Social & Mobile & Clouds, Oh My!" [PDF] here as well.

If you require legal guidance, support or representation on the issues highlighted in the article, or on any other matters, you can contact Joe directly at jrosenbaum@reedsmith.com; or you should get in touch with the Reed Smith attorney with whom you regularly work. We are happy to help.

Looking Forward to 2014

As we say goodbye to 2013 . . . .

For those of you who are loyal readers and followers of Legal Bytes, you know this is the time of year when I break tradition and write a non-legal, more personal and philosophical post for Legal Bytes. I am figuring that if the ancient Babylonians, who celebrated the New Year upon seeing the first new moon after the vernal equinox, could start a tradition that lasted for about 4,000 years – the least I could do was to try to keep up. Although my tradition doesn't date back nearly that far, this posting will contain no hypertext links to distract you; it will not have citations to provide you with reference or background information; nor will it dazzle you with factoids or intrigue you with today's news – legal or otherwise. This is my one chance each year to philosophize and dispense my thoughts and opinions – with absolutely no credentials, qualifications or expertise to do so.

There are, however, two traditions I will continue to perpetuate even though I did not originate either one. First, let me take this the opportunity to wish each of you, your families, friends, loved ones and yes, even an enemy or two, an enchanting and joyous holiday season and a healthy, happy new year, filled with enchantment and magic, health and joy, and prosperity and success. Second, as many of you know, for numerous years I have avoided a tradition of sending out mass mailings of cards and gifts – which are often lost in the flurry of the season, and delayed by the strain on the mail and package delivery services; and while we delude ourselves into believing it "personalizes" the warmth of the season – whether displayed for a few weeks and then put in a drawer, tossed in the trash bin immediately, or relegated to a closet filled with decades of Lucite, there was nothing really personal about that process. So as many of you may already know, I decided years ago to borrow a tradition an old friend told me about and I started making a contribution to a charitable organization for all the family, friends, loved ones, colleagues and acquaintances I want to honor, in memory of those we have lost this past year, near and far, and in recognition of those who have given me a reason to celebrate – clearly far too many to list. In that spirit, as I have done for a number of years, I have made a donation to the St. Jude Children's Research Hospital. My way – perhaps naively – of trying to help some children in need, benefit from the kindness of a stranger.

So now, won't you please pull up a chair, put your other distractions away for just a moment, pour a glass of your favorite beverage, sit back and enjoy . . . and as always, thank you.

When I thought about this year's "philosophical" posting, my first inclination was to offer my humble opinions about the woeful state of intellectual property law and the challenges faced with the onslaught of digital technology. I thought about data breaches and wondered if what people really care about is privacy or data protection, or rather the inability to control information about us so that we can actually get a benefit from sharing information about ourselves. After all, I don't really care if anyone knows I like popcorn, but at least give me a discount coupon for sharing that information with someone I don't know! So many legal challenges – but then I thought, wait, this isn't supposed to be a "legal" posting . . .

So I remembered just recently someone told me that everyone should listen to the Michael Jackson song "Man in the Mirror" at least once every month. I thought about what that meant – really listen to the words. Coincidentally, I keep hearing the John Lennon song "Imagine" playing at surprisingly frequent intervals this time of year. It occurred to me the entire season has a genre of music dedicated to the holiday spirit and the new year. Since I promised no hypertext links, I will resist – but did you ever wonder about the universal power of music that transcends culture, ethnic background, race, religion and all the things we believe separate and segregate us. Why is it that music can have such a powerful and magical effect on us – no matter what age or part of the world we are from.

Although no one asserts that music arose or was derived from the study of mathematics, mathematics is ultimately the basis of sound, being rooted in the frequency of vibration that is audible to the human auditory senses. Tone and pitch all can be expressed as mathematical frequencies. This is hardly new – ancient Chinese and Egyptians studied the mathematical properties of sound, and one of the earliest Greek mathematicians and philosophers, Pythagoras, actually correlated the length of the string to the vibrational frequency, and even expressed musical scales in terms of numerical ratios. In Plato's time, one of the key branches of physics was "harmony," and early studies in India and China sought to show that mathematical laws of harmonics and rhythms were fundamental to our understanding of the world, as well as to our well-being. This time of the year, my interest in music is not in its mathematical properties, but rather in its ability to bring harmony to the world – one musical composition at a time.

Every culture on the planet has folk songs, musical instruments and rhythms, whether or not they include song or dance. Indeed, we launch music into space with explanatory mathematical symbols and algorithms in the belief that if there is life out there, they will view us as friendly and harmonious because of our music, rather than because of our unmanned space craft smashing into their planet!

Consider how important music is in almost every aspect of our lives. Although there are obvious examples of music put to nefarious uses – remember the 1971 Stanley Kubrick film, "A Clockwork Orange" – in most cases, music sets the mood, captivates us, and engages us in ways both explicit and implicit. If memory serves, the only television programming since the beginning of time that doesn't have a theme song is the news program "60 Minutes" – announced only with a ticking clock (unless you consider that music). When the theme song to our favorite program announces the beginning of the program, everyone comes running to the screen (for years I thought the words "Hi Ho Silver" were actually part of the "William Tell Overture"). Who does not remember a wide variety of jingles and catchy tunes advertising products in advertisements of all kinds – from being stuck on Band Aids, to "loving it" at McDonald's (which replaced "you deserve a break today").

Certainly in motion pictures, music has introduced us to aliens ("Close Encounters of the Third Kind"), has been the background for our investigation of the cycle of life and birth and the mysteries of the universe (witness Strauss and Wagner in "2001: A Space Odyssey"). Who doesn't remember the stirring music from "The Magnificent Seven" or instantly recognize the introduction to every James Bond movie. Think about all the different types of music from around the world. Type "musical genres" into Wikipedia and you will get a listing of literally hundreds of types and styles of music. Every major (and some minor) city, town and village has a musical group – marching bands, barbershop quartets, street minstrels, symphony orchestras, rock groups and school recitals. Ever wonder why?

I'm happy to send you the link (not here) but one day, take a look at the clip on YouTube of a homeless young man making the audience (and the judges) cry on "Korea's Got Talent," or 6-year-old Connie singing "Somewhere Over the Rainbow" on "Britain's Got Talent," and making even Simon Cowell melt. Take a peek at the clip from the Andre Rieu concert at Parkstad Stadium in the Netherlands as he introduces 3-year-old violinist Akim, or a YouTube video of Ryan, only 11 years old, playing Chopin like a master.

These are obvious musical "tear jerkers" – sympathetic or extraordinarily young people with amazing talent. But my belief is that music and its universal appeal are deeply rooted in our human DNA and that music – a universal language that has transcended and often defied borders for centuries – has the unique ability to cross artificial boundaries and barriers that far too often seem to separate us and perhaps, bring us together. We humans, all of us, love music. I have no scientific evidence, but music is important. The power of music is too ubiquitous, has been around far too long and is simply too amazing to ignore. We associate life events with music that was playing at the moment. We love concerts, and while musical groups and styles may wax and wane, the one constant is that music in one form or another continues to fill stadia, concert halls and our lives. Music can make us calm or can call us to action; it can stir us and make us smile or melancholy. Its rich contours and seemingly endless complexity can make us feel happy when we are blue, and smile, even when we are walking in the rain.

In recent days, smart mobs around the world (sometimes referred to as "flash mobs" when they gather for seemingly random and pointless activities, only to disperse as quickly as they appear), have grown increasingly popular as expressive outlets for music of all kinds – from symphonic pieces to hip hop and recreation of theatrical production numbers. While the first modern-day, non-musical "flash mob" was the invention of Bill Wasik, a senior editor at Harper's Magazine who, in June 2003, surreptitiously arranged for more than 100 people to gather on the 9th floor of Macy's surrounding an expensive rug – everyone was told to tell the advances sales help that they were a group shopping for a "love rug," that they made purchases as a group and that they all lived together in a warehouse just outside New York City. Imitators soon popped up, but the most recent trend has been around music – sometimes accompanied by dance, marriage proposals, reunions and celebrations – but always celebrations of life.

I admit to being mesmerized by the coordination and harmonious talent of these seemingly unconnected people, even though I realize someone has coordinated (and often rehearsed) the effort. While I am happy to send you links (not here) if you don't believe it, I have vicariously collected musical memories of a crowd in a food court singing Handel's "Hallelujah Chorus," to a crowd singing Michael Jackson songs in Bucharest, Romania; from a flash mob in Central Station, Sydney, performing Riverdance on St. Patrick's Day, to the a flash mob in Springfield, Illinois, performing Les Misérables; from a Bollywood performance on the streets of São Paulo, Brazil, to a Greek festival flash mob in Ottawa, Canada; and yes, a medley of ABBA songs from "Mama Mia" performed on an Israeli beach, to Norwegian Soldiers dancing to Michael Jackson's "Thriller."

I want to take this opportunity to wish family and friends, colleagues and acquaintances, clients and adversaries, those who know me far too well and even those who don't have a clue how they got on this email list, health, peace, comfort and joy this holiday season and in the year ahead. May those who love you come closer and those who dislike you forget why. Most of all, I wish all of you the extraordinary feelings of joy and harmony that come with music, whether sitting alone with your headphones or next to someone on a park bench, perhaps through music we can change the world . . . one noisy note at a time.

So as 2013 comes to an end, I will break my own rule and share a link in this column – or perhaps not a link, but a gift. The gift of music. I leave you with the "Ode to Joy" from Beethoven's 9th Symphony. Instantly recognizable, incorporating the words of the poet Friedrich Schiller: Alle Menschen werden Brüder, Wo dein sanfter Flügel weilt (All men shall become brothers, wherever your gentle wings hover). Take five minutes out of your busy day because, just as the lyrics of "Man in the Mirror" suggest, "no message could have been any clearer. If you want to make the world a better place, take a look at yourself and then make that Change!"

Warm regards for the holidays and best wishes for the new year. Sincerely - Joe Rosenbaum
 

Thank You For 2013 - Best Wishes for 2014

At this time of year, many of us are celebrating holidays and spending time with family, friends and loved ones. Getting ready to bid farewell to 2013 and looking forward to the coming of 2014 – a new year. Some of us even hope we can keep those new year resolutions that might last longer than a week or two.

Although we shouldn’t take it for granted at any time of year, this is one of those seasons we seem to use to pause and reflect on where we have been and where we are going. We think of those who have touched us; those we missed and some we would prefer to forget. We remember those no longer with us and marvel at the miracle of each life born into the world this year. We reflect on friendships through which we have grown, and appreciate those who have helped us on our journey through 2013. This time of year also gives me an excuse to say thank you and to express appreciation to those who have enriched my life. If you are reading this, you are part of my audience – part of the fabric of my professional life; and like the threads of that fabric, I am grateful for your readership and, in some cases, your friendship. I am always appreciative when you take a moment to read, hopefully gain some insight, and perhaps be a little entertained.

I especially want to thank the people at Reed Smith who support my efforts – people like Erin Bailey, Lois Thomson and Rebecca Blaw who make this blog happen. You don't see them; but I do. They help make Legal Bytes come alive. They are amazing professionals and awesome people. Thank you so much. You make it look easy and I could not do this without you!

I would also like to thank Carolyn Boyle at the International Law Office (ILO) – the force behind motivating me to push content into the U.S. Media and Entertainment Newsletter; and while I can take credit for the substance and for nagging my colleagues to contribute, without her, thousands of readers who enjoy the links and insights would be waiting far too long for Legal Bytes content. Thank you.

So as 2013 comes to a close, please accept my appreciation and gratitude to each of you – staff, support, contributors and, most of all, the readers of Legal Bytes. My best wishes to each of you, your families, friends and loved ones, for a wonderful holiday season and a terrific new year, filled with health, happiness and success.

Useless But Compelling Facts - December 2013

As many people in the world are preparing to celebrate Christmas – traditionally associated with the birth of Christ – did you know that some countries, regions and even localities celebrate that event on January 6, or what the rest of the world considers the Feast of the Epiphany. As examples, but certainly not comprehensive, January 6 is celebrated as the birthdate of Christ by many Armenians and Greeks; the Irish refer to January 6 as Little Christmas, but in the Scottish Highlands, Little Christmas is used to refer to New Year's Day, while January 6 (Epiphany) is known as the Feast-day of the Kings. In Norway and Sweden, Little Christmas Day is celebrated January 13, and in Scandinavia, Christmas Eve is sometimes referred to as "Little Christmas.” In other parts of the world (e.g., Slovenia, Ukraine), we find numerous references to “Little Christmas” and even to “Old Christmas.”

But it’s actually more complicated than that – as you will guess from today’s Useless But Compelling Fact Question. And if you want a present, try to get the complete and correct answer:

Why do Armenians in Armenia not celebrate Christmas on December 25, but rather on January 6 AND (bonus question) . . . explain why, if that is true in Armenia, the Armenian Patriarch travels from Jerusalem to Bethlehem on January 17, with celebrations and services starting that evening and continuing in the Cathedral of the Nativity, as Christmas Day is celebrated January 18????

Advocate General Asks EU Court of Justice WHAT?

The Advocate General of the Court of Justice of the European Union recently announced that it had delivered an opinion in connection with a number of proceedings calling for a preliminary ruling in cases involving Ireland and Austria. In Ireland, the owner of a mobile phone submits that the Irish authorities have unlawfully processed, retained and exercised control over data related to its communications. In Austria, three cases brought by the Province of Carinthia have alleged the Austrian Law on telecommunications is contrary to the Austrian Constitution.

Essentially, the top EU legal advocate is asking the EU court NOT to enforce a bad law so the legislature is afforded a chance to fix it. Seriously? That is like asking the U.S. Supreme Court not to strike down discriminatory laws and give Congress a chance to fix them. Seriously?
 

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Monitor Postings in Europe or Face Liability

So you operate a website or have a blog in Europe. You allow others to post comments and interact with your website or blog postings. There is, after all, freedom of expression in Europe, isn’t there? Well on October 10 (2013), the European Court of Human Rights (ECHR) ruled that if you don’t monitor, censor or moderate postings by others on your website or blog, you may well have legal liability and responsibility – especially if the visitors post offensive comments.

In the case of Delfi AS v. Estonia, the Estonian news website (Delfi) ran a story about a ferry that provoked heated controversy in the nation. Many posts and comments contained threatening and offensive language, and many were anonymous. The ferry operator sued Delfi for failing to prevent these comments from becoming public and for protecting the identity of the individuals who posted such threats and abusive language. The Estonian court agreed with the ferry operator and ordered Delfi to pay damages.

Delfi appealed and the ECHR upheld the decision, noting: "The comments were highly offensive; the portal failed to prevent them from becoming public, profited from their existence, but allowed their authors to remain anonymous; and, the fine imposed by the Estonian courts was not excessive." In case you are wondering, Delfi's terms of use state that individuals who comment were liable for the content they posted. The court stated that since Delfi allowed many anonymous postings, it was reasonable to hold Delfi responsible.

What should you do? Call us and we’ll advise you. As always, if you want to know more about the information in this post, how to address the legal risks, or any other matters that could benefit from experienced legal counsel and representation, please contact me, Joe Rosenbaum, or any of the Reed Smith attorneys with whom you regularly work.

Crowd Funding. Apologies, William Wordsworth

"I wandered lonely as a cloud
That floats on high o'er vales and hills,
When all at once I saw a crowd,"

. . . and so begins the beautiful and timeless poem by William Wordsworth. Although Wordsworth's crowd was a host of golden daffodils, the crowds most of us have been hearing about lately are either crowd sourcing (check out When Online Games, Health & Life Sciences and Crowd Sourcing Combine) or crowd funding – the subject of this post.

In today's world, according to the Wikipedia definition, "crowd funding" refers to the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations."

There remains some confusion in the marketplace as to the mechanisms by which the crowds' funds are made available to business ventures, film promotion and production, worthy causes, and civic organizations. Contrary to what many may believe, it is currently not legal to solicit, offer or otherwise make available any form of securities or equity investment (I'm over-simplifying, but that is the net effect) through online, crowd or other web-based funding schemes. In other words, you can't raise equity or solicit investments through crowd funding that provide the expectation of profit or the risk of loss of capital investment – in much the same way the traditional stock markets function when they allow individuals to purchase and sell securities.

It is true that the U.S. Securities Exchange Commission has been talking about promulgating regulations aimed at legitimizing, with regulation and oversight, the use of crowd funding as an investment opportunity (and the SEC has publicly announced that it hopes to have the regulations released for comment this fall). But until the regulators promulgate rules and enable it, you can't "invest," and businesses and other ventures can't "raise capital," through equity or securities offerings through crowd funding.

So what's the buzz about. Well, first it combines "power to the people" with "put your money where your mouth is" in ways unheard of prior to the Internet! Second, there are still opportunities to raise capital from the public in ways that aren't illegal and don't involve equity or securities. Currently, there are four major categories of crowd funding activity. To wit:

I am a musician (not really, it's just an example) and I tell you that if you pay me $1,000, I will write a song to or about you. If you pay me $5,000, I'll not only write the song, but if I'm nominated for a major music award (e.g., Grammy, VMA, CMA), I'll get you two tickets to the awards show. That is referred to as the ”rewards” model of crowdfunding.

Next is the ”pre-payment” model. Please send me $5 and when the song is completed, but before it's released and available to the general public for $7, I will send you a copy. If I offer to autograph it for another $3, I've combined the pre-payment and rewards model.

Then there's the cause-related model. Listen, I am talented and you love good music, but I'm starving. Please just send me $10 so I can eat, rent recording studio time, and try to publish and distribute my music. Pure online begging – there is no expectation of anything in return.

Last, but not least, the ”loan” model. Please help finance the production of my music, my tour (I'll send you a T-shirt) and just lend me some money. I promise to pay you back when I start making money – but, WITHOUT interest. There must be no expectation that anyone who lends money will make a profit (interest) on the loan. While there may still be lending laws that apply as to how this is done, it won't trigger the prohibitions under securities' laws, as long as you don't pay interest.

In conclusion, while there are some high-profile examples of projects that have raised millions through crowd funding, most do not – at least not yet. In fact, most commercial ventures raise very little through crowd funding. In the words of Wordsworth: "A poet could not but be gay, In such a jocund company. I gazed – and gazed – but little thought, What wealth the show to me had brought."

Useless But Compelling Facts - August 2013 Answer

Last week we asked you to tell us what curious, but almost unnoticed, event took place in 1994 in the self-styled Republic of Abkhazia in the Caucasus. Well, unnoticed except to philatelists – stamp collectors!

In case you didn’t know – and why would you, it’s a useless, albeit compelling, fact – Abkhazia is on the eastern coast of the Black Sea and the southwestern flank of the Caucasus. Abkhazia considers itself an independent state, but the Republic of Georgia considers Abkhazia to be a part of the Republic of Georgia. Georgia officially characterizes Abkhazia as the Autonomous Republic of Abkhazia, whose government sits in exile in Tbilisi.

In 1994, officials in the self-styled Republic of Abkhazia issued a postal sheet containing two postage stamps depicting John Lennon and Groucho Marx – an obvious play on Marx and Lenin of Communist-era fame, and presumably a spoof of (or slap at) Abkahzia's past.

The actual stamp design appears below.

Is Your Currency Current . . . Virtual, Digital, Crypto?

In recent months, "virtual currency" has been making headlines. Most of us don’t really think about what "virtual" currency means and often confuse it with other forms of money. That said, there is good reason for confusion and concern. Like many other technology-driven innovations, lines are blurring and we know blurring lines means opportunity and danger. So Legal Bytes will tackle this in two parts. The first (below) attempts to describe what all these new terms mean and how they are used. Legal Bytes part two (later this week) will summarize current events – the confusion and concern over exactly what all this means to our economy and why you should care.

Virtual currencies got their start in virtual economies that exist in virtual worlds. For example, in massively multi-player online role-playing games (MMORPGs) such as World of Warcraft, players "earn" credits and have the ability to exchange, use or "spend" this virtual "value" in the game environment, to acquire virtual tools, weapons, skills and game items that may be recreationally fun and integral to game play; but virtual currency never bought you food to eat or housing to shelter you in the real world. HOWEVER, what happens when real people start buying, selling and exchanging virtual currency, and create markets that interact with the real world?

First, let’s get our terms straight. Digital currency is not "virtual." Digital currency represents a real alternative to government-issued currency. It originated with accounts or promises to pay that were used primarily online. One of the most familiar paper-based examples of a non-government promise to pay is the American Express® Travelers Cheque. More than 100 years old, these payment instruments are backed purely by the full faith and credit of American Express – and not the government of any nation. They aren’t backed by gold or silver or precious jewels or even bananas – just a corporate obligation to repay you, based on a contract (the purchase application form) you sign when they are purchased! As you might have noticed, there are multiple forms of these types of digital promises – one, like its paper-based cousin, is simply a digital promise to pay: numbers representing value backed by the issuer – electronic gift cards, a promotional advertisement that can initiate or enhance a digital music subscription, are examples. In other instances, digital money may be based on some real "deposit" (e.g., using a traditional debit or credit or checking account) in which the transferred funds are held in an electronic account, uniquely identified to the user and more closely resembling a "bank account," with which most consumers are familiar.

In most jurisdictions, companies that issue digital versions of payment instruments (e.g., Travelers Cheques) or that hold digital financial accounts (e.g., PayPal®) often fall within some banking or financial regulation. For example, in the United States, PayPal is considered a payment intermediary, regulated as a money transmitter under the U.S. Federal Code of Regulation and the various state laws that apply to money transmitters. That said, PayPal is not technically regulated by the Truth-in-Lending Act (TILA) or its implementing Regulation Z, nor by the Electronic Funds Transfer Act, implemented by Regulation E [http://www.fdic.gov/regulations/laws/rules/6500-3100.html]; and although PayPal takes great pains to protect against fraud, in the United States, unless you use a credit card (or debit card) to fund a PayPal transaction, consumers have no technical legal or regulatory protection from fraud by a seller. In Europe, PayPal (Europe) Ltd., was licensed by the Financial Services Authority (FSA) as an Electronic Money Issuer, and in 2007 transferred all of its European accounts to Luxembourg to a new entity PayPal (Europe) Sàrl et Cie SC, which is regulated by the Commission de Surveillance du Secteur Financier.

Some of you history buffs will remember DigiCash (originated by David Chaum in 1990), which sought to anonymize financial transactions using cryptography. Well over the past few years, a company named BitCoin (and others such as Litecoin and PPCoin, which are to a greater or lesser extent based on, inspired by, or technically comparable to BitCoin), have launched and popularized a form of digital currency that is often confused with and referred to as "virtual." This form of digital currency is referred to by financial and security experts as “cryptocurrency.” Cryptocurrency is a digital currency that uses encryption technology to create and manage the digital currency. They are peer-to-peer and decentralized in nature and, at least for now, all are pseudonymous.

As you can guess, all of these confusing terms and the fact that virtual currency in games, gaming, online social media and networking platforms, and virtual world environments began interacting with the real world, has become not merely confusing but alarming. Look at Second Life, a virtual world that allows the purchase and sale of "Linden Dollars," the in-world official currency, in exchange for real money through third-party websites. Second Life accords both virtual "real estate" and intellectual property real value in its virtual environment; enables "residents" (avatars) to creatively enhance and customize the resources available in-world; allows some property rights to be exclusive or limited (think supply and demand); and permits the exchange and purchase and sale of virtual property rights in-world; and one’s property remains one’s property (and one retains Linden Dollars until spent or given away or used) throughout the life of one’s avatar – at least as long as Linden Laboratories continues to maintain the Second Life virtual world environment.

These are many of the same conditions that affect real financial systems. No wonder that what started as a curiosity – online digital playgrounds with no real money or value being exchanged – have become complex economic environments that financially interact with real world economic systems and are causing concern among legislators, regulators and courts around the world. In part two, Legal Bytes will review recent developments and try to describe the challenges facing legal, financial, security and business professionals.

Useless But Compelling Facts - August 2013

After the demise of the Union of Soviet Socialist Republics, the Soviet Union (as it was known to Cold War aficionados) split into republics and nations. The splitting process, as you can appreciate, was not an easy one, with factions and governments splintering and bickering and, yes, even waging war for control and for legitimacy. One such self-styled Republic was Abkhazia - a territory claimed to be owned and controlled by the Republic of Georgia in the Caucasus.

In 1994, the government of Abkhazia did something that was novel and quite humorous - ostensibly to gain both global credibility and revenue (and to serve a practical purpose for the emerging, would-be Republic), and in the process, put an indelible, although not particularly valuable, stamp on one of the oldest hobbies in the world. Can you tell me what they did?

...And Now a Word from Your Hedge Fund

This post was written by Frederick Lah.

This past Wednesday (July 10), the SEC voted 4-1 to approve amendments to Rule 506, lifting the 80-year ban on advertising for hedge funds and certain other investments (See, SEC Votes to Ease 80-Year-Old Ban on Private-Investment Ads.) Reed Smith previously reported these amendments when they were initially proposed in August 2012, and you can read our earlier analysis, SEC Regs Amended To Allow Hedge Funds To Advertise: Potential Data Privacy Implications.

Under the revised Rule 506, hedge funds and other issuers seeking to conduct private offers may now use general solicitation and advertising to offer their securities, provided that: (1) the issuer takes reasonable steps to verify that the purchasers are accredited investors; and (2) all purchases of the securities fall within one of the categories of persons who are accredited investors, or the issuer must reasonably believe that the investors fall within one of the categories at the time of the sale.

To be an accredited investor, the individual’s net worth must exceed $1 million, excluding the value of a primary residence, or the individual’s annual income must exceed $200,000. According to the SEC, the determination of the reasonableness of the steps taken to verify that the investors are accredited is an “objective assessment” by an issuer. An issuer is required to consider the facts and circumstances of each investor and the transaction. The final rule provides a non-exhaustive list of methods that an issuer may employ for verification.

As noted in our previous analysis, it is unlikely we’ll see hedge funds competing with large consumer brands for prime advertising space. Instead, given the target audience, we’ll likely see more tailored efforts, such as email marketing campaigns, direct phone marketing, and targeted online advertising. We are also likely to see new strategies from issuers such as speaking about funds in public and posting details on websites (which may represent quite a change considering many issuers don’t even have websites). As issuers enter into the world of marketing, they will also have to deal with the reality that the SEC is not the only regulatory agency on their radar; these issuers will need to make sure that they’re not engaging in unfair or deceptive marketing practices and drawing the ire (and an investigation or enforcement action) of the FTC.

The amendments become effective 60 days after publication in the Federal Register. For more information on this issue, please contact Frederick H. Lah, the author, or Joseph I. Rosenbaum, editor and publisher of Legal Bytes.

WOMD. Now Available at Your Nearby Staples!

I read with interest, recent reports of a 3-D printed hand gun, created by Defense Distributed, being test-fired at a gun range just south of Austin, Texas. Defense Distributed, whose website bills itself as "The Home of the Wiki Weapons Project," fired the gun in front of an observer from Forbes, and you can view the gun, named The Liberator, being test-fired in a video taken during the test and posted on YouTube. Defense Distributed also announced it would post the gun's blueprints and construction details on the company's ownDefCAD design site. For you history buffs, the "Liberator" was also the name of a single-shot pistol designed to be distributed by dropping them from airplanes flying over France during World War II.

The gun isn’t completely plastic – the firing pin is a common metal nail that can be purchased at a hardware store and can be detected by metal detectors – and that single metal nail apparently makes it legal under U.S. law (the Undetectable Firearms Act of 1988; Pub.L. 100–649, H.R. 4445, 102 Stat. 3816). The 3-D printer used to make the rest of the plastic components is a Dimension SST 3D printer made by Stratasys, which apparently now has a U.S. federal license to manufacture firearms.

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Useless But Compelling Facts - April 2013

EXTRA, EXTRA !  WORLD WIDE WEB CELEBRATES BOTH A BIRTHDAY AND AN ANNIVERSARY!!

In a world of “firsts,” Legal Bytes is publishing a Useless But Compelling Fact – both the Question & the Answer at the same time. We will, of course, return to our normal (do we have a "normal") pattern shortly, but this one is too good and too timely to pass up.

Today is the 20th Anniversary or, if you prefer, the 20th Birthday, of the World Wide Web. Yes, exactly 20 years ago, the European Organization for Nuclear Research known as CERN made the technology, promulgated by Sir Tim Berners-Lee, that is the foundation of the World Wide Web, freely available for anyone to use. An international organization established in 1954, CERN also operates the world's largest particle physics laboratory. The decision to open the technology to everyone transformed the Internet from primarily a communication and data transmission network into a platform where everyone can freely share anything and everything, from music and images and videos, to educational and scientific materials, and where interactions, networked globally, can reach millions and often billions at the speed of light.

To commemorate the event and mark the anniversary, CERN has republished the first website at the original URL from 20 years ago. Not particularly exciting, but definitely enlightening – it shows us how much the World Wide Web has changed and illuminates what may yet be ahead in the evolution of our use of this formidable and dynamic technology. Take a look at the original website and web page at the following URL:

http://www.w3.org/History/19921103-hypertext/hypertext/WWW/TheProject.html

What else do we need to say? Well, how about Happy Birthiversary WWW!!!