Wednesday, September 28, 2011

Mobile Apps Developers: Please Read if Your Apps Target Young Audiences

On September 8, 2011, the U.S. District Court for the Northern California entered a Consent Decree and Order for Civil Penalties, Injunction and Other Relief against a mobile apps developer, W3 Innovations LLC, and its owner, Justin Maples.

There are several commentaries about this that immediately jump to mind. First, the enforcement action was brought by the Federal Trade Commission (“FTC”) against the corporate entity, W3 Innovations LLC, and personally against its officer and owner Justin Maples. This poses a question about the limited liability protection of a corporate entity and why it was pierced in this case. Second, this action is the first FTC action against mobile apps developers, and it sends (or at least should send) a strong message to the whole developers community. Third, in my opinion, this situation could have been avoided if Justin Maples retained a good intellectual property lawyer before launching the apps (a good IP lawyer should be familiar with the Children’s Online Privacy Protection Act (“COPPA”)). Many start-up owners avoid extra costs by not consulting attorneys, but expose themselves to large financial risks later on. Most often, as in this case, such risks could easily be avoided.

COPPA requires that website operators notify parents and obtain their prior consent before collecting children’s personal information. COPPA also requires to post a privacy policy that is clear, understandable and complete.

According to the FTC press release and the Consent Decree, each available here ( and, the FTC charged the defendants with violating COPPA by illegally collecting and disclosing personal information from thousands of children under age 13 without their parents’ consent. In fact, there were over 50,000 downloads of the games that collected personal information. As part of settlement, the defendants agreed to pay a $50,000 penalty, among other things.

The “Emily” apps developed by W3 Innovations allowed children to create virtual models and design outfits. The apps then encouraged kids to email “Emily” their comments and submit blogs via email. The FTC alleged that the defendants collected and maintained thousands of email addresses of the app users. The apps also allowed kids to post information, including personal information, on message boards.

According to the FTC, the defendants did not disclose their practices and did not ask for parental consent before they collected, used and disclosed their children’s personal information. Please note that the Consent Decree is a settlement, and does not constitute an admission by defendants of violation of the law.

There are many lessons to be learned here. For mobile developers and website owners: please create, review, update and disclose your privacy policies. These are not just boilerplate documents that can be copied from another site. For parents: check what games your kids are playing and what are the information collection practices of every app and every website that your children frequent.

Please note that this is not a legal advice and is for general informational purposes only.

Tuesday, September 27, 2011

America Invents Act Introduces a New Patent System

On September 16, 2011, President Obama signed a new act “America Invents Act” that is going to radically change the way Americans file patents. Found here: The Act will become effective 180 days after signing, - just enough time to understand the new system introduced by it.

Although not an expert in this field, to me, a major difference introduced by the Act is the change from the “first to invent” to the “first to file” system, which is more in line with the patent systems in the other countries.

For a detailed review of the Act, check out the article written by attorneys at Sunstein Kann Murphy & Timbers LLP, a Boston-based IP firm, found here:

Copyright for Computer Software

Intellectual property is an asset that affects the valuation of a business. When a business owner wants to sell his or her business or issue securities to an investor, the price per share the owner is going to receive depends on the valuation of the business. The more assets the business has, - the higher valuation it is going to receive.

Some owners of software companies may not realize that their software programs should be copyrighted with the U.S. Copyright Office. Technically, software programs (like any other copyrightable work) automatically get copyright once the work is done or there is at least a working version of the program, even if incomplete. So, if the copyright already exists, why file a copyright application with the U.S. Copyright Office?

Here is why:

1. Registration establishes a public record and lets others know that you hold a copyright on this work.

2. Registering the software program with the U.S. Copyright Office within 5 years of publication (i.e., first availability to the public, such as software release) creates a legal presumption that you are the owner of the program and that all facts in your copyright application are true. It means that if there is ever a dispute over the ownership, the court will presume that you are the rightful owner, and it will be up to the other side to prove otherwise.

3. If you find out that someone is infringing on your software program, you need to have the registration done in order to be able to bring a law suit in the federal court.

4. If you register your software program prior to an infringement or within 3 months of publication (ex: software release), you may be entitled to recover statutory damages and attorney fees from the person you sued. Otherwise, you can only get the actual damages and lost profits, usually a much smaller amount.

5. Finally, registration with the U.S. Copyright Office allows you to record the registration with the U.S. Customs Services (this is less relevant for software programs, but I wanted to mention this anyway).

It does not cost much to register a copyright with the US Copyright Office (currently, $35 for an online registration and $50 for a mail-in one). But the benefits are obvious.

In the next post, I will discuss how you can preserve your trade secrets in the software source code and still file the federal copyright application.

Monday, September 26, 2011

The legal benefits of New York surety bonds for business owners

The following is a guest post submitted by Danielle Rodabaugh, editor of the Surety Bonds Insider.

Although surety bonds have been used as a means of legal reinforcement for decades, many New York business owners only learn about their benefits once it's too late. Only after they're in the midst of a lawsuit for failing to meet a bonding requirement do they care about why they need one. To prevent such situations, business owners should understand a few basic legal functions of New York surety bonds.

Surety bonds are legally binding contracts.

Each surety bond that's issued functions as a legally enforceable contract that binds together three parties.

  1. The principal is the business owner that purchases the surety bond.

  2. The obligee is the entity, typically a government agency, that requires the surety bond.

  3. The surety is the agency that executes the bond, thus providing a legally binding financial guarantee that the principal will fulfill certain obligations.

If a principal fails to meet the bond's terms, harmed parties can make a claim to gain reparation. For example, earlier this year the NewYork State Liquor Authority revoked five alcoholic beverage licenses and cancelled 10 more for liquor law violations. The authority requires all businesses with a retail liquor license to maintain a $1,000 surety bond. As is customary with liquor license revocation and cancellation in New York, the authority made claims on most of the bonds and collected a total of $12,000.

The surety that issued the bond is ultimately responsible for paying any claims, but in some cases the principal signs an indemnity agreement as a legal promise to repay the surety for potential losses. When a claim is made on a bond, it is examined on an individual basis to determine the obligation each party held under the bond's legal language. Before purchasing a surety bond, applicants should always be sure they understand the contractual obligations to which they're agreeing — no matter the specific surety bond type.

Surety bonds regulate industries and keep government agencies from losing money.

When business owners are looking to buy surety bonds, it's typically because they have to fulfill some sort of requirement outlined in a law that regulates the profession. For this reason license and permit bonds are some of the most prevalent in today’s bonding market. These bonds are required as a prerequisite to getting a business license. For example, New York auto dealers must post a surety bond before they can be licensed to sell cars in the state. As such, New York auto dealer bonds reinforce state laws that regulate car dealerships.

Surety bond requirements also protect government funds as well as taxpayer money. For example, contract bonds are used by New York's construction industry to guarantee that contracting firms complete projects appropriately. If a contractor abandons work on a publicly funded project, the government can make a claim on the bond so the funds won't be lost.

Surety bonds protect business owners and their customers.

The surety bond process is especially valuable because a neutral third party, the surety, evaluates the applicant before determining whether to issue a bond. The surety bond process can be frustrating for some applicants, and for good reason. Because surety providers want to avoid claims, they set stringent qualifications for their applicants. Surety providers are hesitant to issue bonds to applicants that have low credit scores, poor work histories or other signs of financial instability. The nature of this process keeps such individuals from entering the market, which protects consumers and legitimate companies from working with or losing business to risky enterprises.

Whatever the specific law be that requires a surety bond, rest assured it was put in place to protect against financial loss, whether it be on behalf of consumer purchases or government funds. Failing to maintain a surety bond as required by law can mean legal action for a business owner. Although the surety bond process might seem like a hassle to business owners who need bonds, the legal implications should be taken seriously.

This article was written by Danielle Rodabaugh, editor of the Surety Bonds Insider. One of the publication's ongoing goals is to educate professionals and their lawyers about the legal implications of surety bonds.