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Colleagues Rafi Azim-Khan, head of Pillsbury’s Data Privacy practice in Europe, and counsel Steven Farmer recently penned a piece providing a EU/UK perspective on lessons learned from the Ashley Madison hack, as well as on how to reduce the risk of cyber attack in an era where such incidents are all-too-common.

Read their article: Reducing the Risk of Cyber Attacks in the Wake of Ashley Madison.

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Anyone who reads our blog knows that our posts frequently touch on company policies for users known as Terms of Service, or Terms of Use. Over at the Global Sourcing practice’s SourcingSpeak blog, our colleague Meighan E. O’Reardon recently published Have You Thought About Your Online Terms of Use Recently?, an excellent look at the importance of enforceability in such online policies. Whether you’ve thought about your own online Terms of Use lately or not, it’s worth a read.

Click here to read the full blog.

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In a recent lawsuit, Uber Technologies Inc. is accused of violating California’s Unfair Competition Law. Specifically, the complaint alleges that Uber misleads its users by: (1) falsely advertising its services as cheaper than a typical cab company for specific routes when its services can actually be more expensive during certain peak times, and (2) presenting offers for free ride credits in exchange for referring business without notification prior to the users making the referral that the free ride credits will expire. Although the allegations in the lawsuit do not mention Uber’s terms of service, the facts alleged in the lawsuit highlight the importance of having comprehensive terms of service.

To give a little context, terms of service (also known as “terms of use” or “terms and conditions”) are rules which a user of a service must acknowledge and agree to abide by to use the service. In many instances, a company can successfully obtain early dismissal of a lawsuit by relying on its terms of service. For example, if a lawsuit is brought against a company for misleading users solely on the grounds of allegedly failing to give notice of certain limitations, but those limits are clearly set forth in the company’s terms of service (and do not violate federal or local laws or regulations), the lawsuit may usually be dismissed very early in litigation.

As of the date of the writing of this post, for instance, Starbucks’ terms and conditions for its reward program spell out the expiration period for its “free drink or food item” rewards that are credited to a user’s account after certain requirements are satisfied. Prior to becoming an authorized user of the reward program, the user must agree to the expiration period set forth in Starbucks’ terms and conditions for the rewards.

Uber users similarly must agree to Uber’s terms of service prior to becoming an authorized user of its service. As of the date of the writing of this article, however, Uber’s terms of service do not appear to explicitly describe when and how its rates may change from its advertised rates or when free ride credits will expire. While there may be other ways in which Uber can approach the recent lawsuit, it is likely that early dismissal of the lawsuit based on its terms of service may have been possible had it included the foregoing rate and free ride credit terms.

All in all, it’s just another reminder that the going rate for an ounce of prevention remains a pound of cure.

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Even freed from bricks and mortar, online retailers and service providers are realizing that market share is not infinite. A complaint recently filed by Angie’s List Inc. against Amazon Local LLC for its newly launched online home services network can be viewed as the inevitable result of what will happen as internet giants eye each other’s customer bases. Angie’s List Inc. provides consumers with online reviews of home improvement service providers (e.g., handymen, gardeners, electricians, etc.) from other consumers in their area. Although competitors have tried to challenge Angie’s List, the platform has remained the dominant player in the industry. The company largely credits the stable of reliable home service professionals it has built over the past twenty years for its market stability.

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Last Friday, Homejoy—a startup that provided on-demand house cleaners—announced that it will be shutting down at the end of July. In an interview with Re/Code, Homejoy’s CEO attributed its fall to the recent Uber decision, further confirming the belief of many that the Uber decision poses a significant threat to companies in the “sharing economy” that rely on being identified as “technological platforms” that facilitate private transactions between independent service provider partners and consumers to avoid certain laws and regulations. Such identification may, for instance, allow companies to properly classify their service provider partners as independent contractors to mitigate costs of compliance with laws and regulations that govern employer/employee relationships. This article considers a few user-directed features or offerings that could help tip the scale in their favor.

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Deadline is August 8, 2015.

After almost a year of discourse and revision, New York’s Department of Financial Services’ final “BitLicense”regulation has been published in the New York State Register and an application has been made available. This client alert provides a brief summary of who must apply, the application process and ongoing compliance requirements.

For more information, please see the Client Alert.

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Congratulations to b Spot, a licensed mobile games community that lets adults legally wager and win cash in the US, which has been named a TiE50 Start Up for 2015.

After screening 2,716 companies worldwide, then narrowing down the group to 160, b Spot was named one of the top 50 start-ups at TiEcon Friday in Santa Clara, California.  All 50 as a group are considered the Top Start-Ups of 2015.

TiEcon is the world’s largest conference for entrepreneurs. Winners are judged by an expert panel of venture capitalists, angel investors, serial entrepreneurs, CEOs and technology experts.

“After three years of hard work, it’s gratifying for our company to win a TiE50 award and gain this type of meaningful recognition,” said David Marshall, CEO of b Spot, who presented at the conference. “The Company is being recognized for its ingenuity, technical achievements, and its massive market potential.

Past winners of the TiE50 award include:

– Couchbase
- Kabam

– Wildfire Interactive (acquired by Google)

– Bump Technologies (acquired by Google)

– mFoundry (acquired by FIS)

– YuMe (now a public company)

 

“TiE50 has become a global brand that attracts thousands of companies worldwide. We screened 2716 companies this year and announced the most innovative 160 companies as 2015 TiE50 Top Start-ups. This pool of the very best-of-the-breed is again subjected to another round of rigorous judging to pick out the ultimate 50 winners proudly carrying the 2015 TiE50 Winner recognition. A star attraction of the conference is TiE50 presentations. Audiences are treated to amazing ideas and innovative technologies,” said Ram K. Reddy, the program chair.

About TiETiE is a global not-for-profit organization fostering entrepreneurship through mentoring, education, and networking. We consider entrepreneurship to be the single most powerful instrument to advance global prosperity. Our greatest strength is our network of over 60 chapters in 17 countries with a worldwide membership exceeding 14,000 that includes successful entrepreneurs, venture capitalists, corporate executives, and aspiring entrepreneurs. For more information on TiE, visit www.tie.org.

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

 

Goldman a Lead Investor in Funding Round for Bitcoin Startup Circle
Goldman Sachs part of $50 million round that values Circle Internet at around $200 million.

Hands-on With Microsoft HoloLens: Augmented Reality That Doesn’t Make You Sick
By knowing exactly where you are in your environment, the HoloLens software is able to position objects much more steadily, resulting in a more seamless user experience.

Treasury Penalizes Ripple Labs, in First Action Against Virtual Currency Exchange
Agency says Ripple failed to obtain license and follow anti-money-laundering rules.

Augmented Reality Might Fix Our Posture, Social Lives
“I think it’s a natural evolution that we will all be wearing some lightweight, head-mounted display in the far future,” Daqri VP of business development Brian Selzer said on a panel at the NeuroGaming Conference.

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The New York Times reports that New York State’s top financial regulator has granted the first license to a Bitcoin exchange, allowing it to open legally to customers across the country.

To find out more information, please read Bitcoin Exchange Receives First License in New York State.

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On March 10, 2015, the New Jersey Division of Taxation issued Technical Advisory Memorandum TAM-2015-1, explaining its policy regarding convertible virtual currency.

  1. The IRS has held that convertible virtual currency (CVC), such as Bitcoin, is treated as property for U.S. federal income tax purposes. Consequently, transactions involving CVC are treated as barter transactions. In general, each party in a barter transaction is viewed as both a buyer (of the goods or services acquired) and a seller (of the goods or services given in exchange). See our client alert of March 26, 2014. New Jersey conforms to the federal treatment of CVC for corporate and personal income tax purposes, including wage withholding and reporting of payments to independent contractors.
  2. In New Jersey, sales tax is imposed on the buyer, but the seller is obligated to collect and remit the tax. Sellers of taxable goods or services that accept CVC in exchange for those taxable goods or services must register with the New Jersey Division of Taxation for sales tax purposes.
  3. Where a customer exchanges CVC for taxable goods or services, the customer owes sales tax as if it paid in U.S. dollars. In this case, the sales tax owed is determined by the market value of the CVC exchanged, converted into U.S. dollars at the time of the exchange, and the seller of the goods or services that are taxable is required to collect and remit the sales tax on the transaction. On the other side of the barter transaction, the seller of the CVC (the customer) is not required to collect and remit sales tax on the transaction because the CVC is nontaxable intangible property under New Jersey sales and use tax law.
  4. The sale of CVC itself in exchange for U.S. dollars or in exchange for another CVC does not create a sales tax obligation on the part of either the seller or the buyer.
  5. Sellers accepting CVC must record in U.S. dollars at the time of each transaction the value of the CVC accepted, the value of the goods or services sold, and the amount of sales tax collected. The sales tax is based on the value of the CVC converted to U.S. dollars at the time of a taxable transaction. Sellers must record the value of the CVC accepted at the time of each transaction in U.S. dollars and the cash value of the goods or services sold. The amount of sales tax collected by the Seller must be recorded in U.S. dollars at the time of each transaction, and must be remitted in U.S. dollars. Sellers who accept CVC as payment for goods or services must also retain documentation of the amount for which they regularly sell the same or similar property to customers for U.S. dollars.

The information presented is only of a general nature, intended simply as background material, is current only as of its indicated date, omits many details and special rules, and accordingly cannot be regarded as legal or tax advice.

Download: Five Things to Know about New Jersey’s Taxation of Convertible Virtual Currency.