Social Media & Games Law Blog

The Financial Industry Regulatory Authority (FINRA) has levied a $7.5 million fine against LPL Financial LLC (LPL) for a series of email system failures which prevented LPL from accessing hundreds of millions of emails and reviewing tens of millions of other emails. On top of that. FINRA ordered LPL to establish a $1.5 million fund to compensate affected brokerage customers due to allegedly material misstatements it made to FINRA during the investigation that revealed the  email failures. 

FINRA alleged that "as LPL rapidly grew its business, the firm failed to devote sufficient resources to update its email systems, which became increasingly complex and unwieldy for LPL to manage and monitor effectively. The firm was well aware of its email systems failures and the overwhelming complexity of its systems."

As a result, LPL failed to produce all requested email to certain federal and state regulators, and FINRA, and also likely failed to produce all emails to certain private litigants and customers in arbitration proceedings, as required.

According to Brad Bennett, EVP and Chief of Enforcement: "As LPL grew, it did not expand its compliance and technology infrastructure; and as a result, LPL failed in its responsibility to provide complete responses to regulatory and other requests for emails. This case sends a strong message to firms to make sure your business does not outgrow your compliance systems."

The number of regulatory enforcements continueto increase. It is important for all companies, and particulary those in regulated industries to do periodic compliance audits. If you have questions on social media or IT legal audits please contact us.

It took just two weeks for the first online poker site located and operated completely inside the United States to deal its one millionth hand of poker. While UltimatePoker.com is only available to Nevada residents located in Nevada at this point, it has set the stage for what is likely to be a rapidly expanding market.

For more information, check out Ultimate Poker's legal online betting foray could be a game changer in the U.S.

A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

What's the Matter With Zynga?
This was supposed to be a story about a guy building a highly anticipated mobile game. Instead, it's a story about a multi-billion-dollar Internet company that is almost certainly headed for disaster.

Video game maker drops gun makers, not their guns
In the midst of the bitter national debate on gun violence, gun manufacturers and videogame makers are delicately navigating one of the more peculiar relationships in American business.

Atari Asks For More Time To Assemble Asset Sale
Atari Inc. sought an extra 90 days to put together a Chapter 11 plan without the threat of rival plans being submitted, saying it needs more time to put together a sale of its well-known brands and intellectual property.

Nintendo Scores Fed. Circ. Win In Wii Controller IP Row
The Federal Circuit Monday that Nintendo Co. Ltd.'s imported Wii video system did not infringe Motiva LLC's wireless controller patents, saying Motiva's failure to commercialize its patented technology had nothing to do with Nintendo's subsequent presence in the market.

High Court Seeks SG's Opinion in 'Rock Band' IP Row
The U.S. Supreme Court asked the Obama administration to weigh in on whether the Federal Circuit applied too inflexible a standard when it reversed a finding of inequitable conduct against a patent holder suing Electronics Arts Inc. and others over the "Rock Band" video game.

Homeland Security cuts off Dwolla bitcoin transfers
Immigration and Customs Enforcement confirms an "ongoing investigation" that led to Dwolla cutting off bitcoin transfers to Mt. Gox.

A new Manhattan bar has become one of the few brick and mortar operations to accept Bitcoins as a method of payment. For more information, see New York City bar Accepting Bitcoins as Payment.

What are Bitcoins? They are essentially a form of digital cash or virtual currency. They are unique in that there is no central issuing or regulatory authority (such as a corporation or government), rather they are issued through the use of downloadable software which in effect searches for Bitcoins over the Internet. A successful search, which takes varying and increasing amounts of computer processing power, results in the issuance of a block of Bitcoins. The more people searching, the more difficult it is, but also the more valuable the Bitcoins are worth. One of the key features of Bitcoins is anonymity. Just like with a cash payment, there are no records as to the individual engaging in the transaction, as the transactions can occur through anonymous Bitcoin addresses. Bitcoins, however, are regulated, at least on the administrator side in the US, by the Department of the Treasury's Financial Crimes Enforcement Network (FINCEN). For more on their virtual currency regulations see FINCEN Issues Virtual Currency Regulations.

The bar accepts Bitcoin payments through a virtual wallet app, which is similar to most app-based payment systems. The app converts bar tabs from US dollars into Bitcoins, which are then transferred to the bar's bank. Notably, some of the press for the bar may be due to the owner's close friendship with the chairman of Bitcoin.

Pillsbury attorney, Sean F. Kane will be a featured panelist at the upcoming Video Game Bar Association's inaugural Game Business & Legal Affairs conference. The conference will provide an in-depth analysis of the prevalent and pertinent legal and business issues within the video game industry. Founded in 2011 as an international membership organization, its mission is to provide a forum to promote the interaction of licensed attorneys whose primary practice is within the video games/interactive media industry, for lawyers are in-house counsel at game companies, and lawyers in private practice who represent game-industry clients. Mr. Kane will be serving as a panelist during the "Adventures in Finance" session which will take place on Tuesday, May 21st at 9:00am PT.

Register now: Gamification Summit Register

Presented By:

Please join us at the Augmented World Expo 2013 (Santa Clara, June 4 - 5) for 2 days of workshops, sessions, and networking dedicated to understanding how to drive behavior in consumers, employees and stakeholders. Now in its 4th year, Augmented World Expo (formerly ARE) is assembling the biggest names -- from the hottest startups and leading AR providers to the Fortune 500 -- to showcase the world's best augmented experiences that solve real world problems in all aspects of life, from entertainment and brand engagement to enterprise, industrial and commerce applications. It is expected to draw a record number of attendees from all over the world and offer a fantastic opportunity to network, learn, inspire and experience Augmented Humans in an Augmented World.

• Network - Connect with 1000 like-minded AR enthusiasts
• Learn - 35 hours of educational sessions by 1000+ industry leaders
• Experience AR - The largest expo of "Augmented Humans in an Augmented World"
• Get Inspired - Past sessions were rated 92% positive (on average)
• Find a product or partner - In 2012 70% of attendees reported finding a product or partner
• It will exceed your expectations - 93% of 2012 attendees said they will likely return.

REGISTER NOW (If you register before May 7th, use our discount code AWE2013 for registration) !

The Bank of China Hong Kong announced recently that it plans to launch its first credit card that is compatible with Near Field Communication ("NFC) technology this year. NFC is a set of standards for smartphones and similar devices to communicate with each other by either by touching or bringing them into close proximity. One of the products that will be offered will serve as an electronic wallet for clients containing all their credit cards issued by the bank and will enable them to turn their iPhones into payment devices. To read more, see BOC's new-tech credit cards on way.

Yesterday a NY court again dismissed Viacom's $1 billion suit against Google/YouTube for copyright infringement. The court found that the DMCA shielded YouTube from liability after an appelate court (see prior blog post) vacated the prior dismissal.

This decision reaffirms the fact that, subject to certain exceptions, the burden of policing copyright infringement falls sqaurely on the copyright owners, not online service providers who host content uploaded by users. One of the potential exceptions at issue here is if the online service provider has actual knowledge of specific infringing content. The court found that even if YouTube knew generally that there was alot of infringing content, the exception did not apply becasue there was no evidence that they knew of specific clips that were infringing.

This decision again confirms the power of the DMCA for online service providers who host user uploaded content. But the DMCA protections do not automatically apply. You must take proactive steps to benefit from the protection. If you have any questions about the DMCA please contact us.

Here is a copy of the decision

Please join us April 24-25 at the Social Casino Summit.  Pillsbury will be participating in the Global iGaming Summit and Expo as an exhibiting sponsor

James Gatto will be presenting a session titled, "Clarifying the blurred legal boundaries between various forms of social, virtual currency, prediction, sweepstakes and other forms of gaming - what you can and can't do," at 3:30pm PT, Thursday, April 25. 

With social casino games monetizing five times better than other social games, whether on Facebook or other online and mobile platforms, the opportunity is the lucrative one, but the market is getting very crowded.

Join the early adopters, established leaders and new comers in the social casino space at this inaugural Social Casino Summit and:

·         Bring the 'social' to social casino - take your games to the next level with more sophisticated game design and enhanced virality features

·         Transform your games so they offer a truly cross-platform and cross-product experiences

·         Learn what works in real casino properties to keep players engaged and loyal - could these lessons help you build games that will retain customers better?

·         Crack the social sportsbetting challenge and tap into the lucrative male demographic

·         License well recognized brands to create branded games to tap into new customer bases and increase customer loyalty

·         Understand how the business of social and real-money gaming converge - is there really a proven case for player conversion

·         Assess the real-money gaming opportunity to understand whether you should exploit it through a partnership or on your own

·         Network with real-money gaming operators and suppliers - find partners for your foray into the real-money gaming world

·         Understand the future of regulated internet gaming in the USA by attending the co-located GiGse - learn about the regulatory landscape and business opportunities

Check out this Mobile Payments Infographic brought to you by the Mobile Payments Working Group, as part of the Application Developers Alliance. Pillsbury team members Jim Gatto, Deb Thoren-Peden and JiJi Park are all members of the working group and contributed to this effort. If you like to learn more about some of the unique legal issues related to mobile payments, contact us! We are also developing some informative events on the topic so stay tuned!

The SEC has provided guidance to publicly reporting companies on how to use popular social networking sites, such as Facebook and Twitter, consistent with federal securities laws. For more information, please read Safe Tweeting: SEC Provides Guidance on Social Media and Regulation FD Compliance.

Pillsbury Partner, Richard Kirkpatrick, will be a featured panelist at the upcoming Global Trademark Search and Application Workshop.  The seminar will be providing practical guidance for the trademark search and application process in the U.S. and abroad. 

Using real-world examples, this practice-based, hands-on workshop will get attendees involved and provide takeaway tips that can be put into use in daily practice immediately.  Learn about the differences and similarities of differing search strategies here and abroad using interactive techniques and explore the application process and beyond.

The panel will include the following:

CO-CHAIR(S)
Richard L. Kirkpatrick, Pillsbury Winthrop Shaw Pittman LLP
Anne Hiaring Hocking, Hiaring + Smith, LLP

ADDITIONAL SPEAKERS
Mary Bagnall, Charles Russell LLP
Paul Kretschmar, Vossius and Partner

LOCATION
PLI California Center
685 Market Street
San Francisco, California 94105

The Securities and Exchange Commission issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.

According to an SEC press release:

• The SEC's report confirms that Regulation FD applies to social media and other emerging means of communication the same way it applies to company websites.
• The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they've been made aware that's where to look for it.
• The recent report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.
• Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time.

According to George Canellos, Acting Director of the SEC's Division of Enforcement "One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information. Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don't know that's where they need to turn to get the latest news."

The SEC's report of investigation stems from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix's monthly online viewing had exceeded one billion hours for the first time. The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix, citing market uncertainty about the application of Regulation FD in this context.

Click here for a full copy of the SEC Report

For additional information on social media legal issues please contact us.