Twitter’s terms and conditions state:

You retain your rights to any Content you submit, post or display on or through the Services. By submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods (now known or later developed).

Twitter respects the intellectual property rights of others and expects users of the Services to do the same.

While a user grants Twitter a non-exclusive license to use the Content, the license is clearly limited to Twitter only.  And, Twitter has an entire section on copyright infringement and how to notify Twitter of suspected copyright infringement by another user.  The Twitter Rules even say that each user is expected to respect the copyright ownership of other users.  Thus, the court found that the Twitter terms and conditions do not”clearly manifest” a right for third parties to reublish content.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

1. Be on the lookout for the next Pinterest.
2. Determine the level of social media interactivity that works best for you and your business.
3. Determine an appropriate policy regarding ownership of user generated content.
4. Proactively address ownership and use of business-related social media accounts by employees.
5. Develop a social media-oriented IP infringement detection strategy.
6. Be prepared to address social media-based infringement in new ways.
7. Don’t forget account social media evidence in IP litigation.
8. Be sensitive to rights of publicity.
9. Be mindful of the FTC’s endorsement rules.
10. Be aware of the America Invents Act’s implications for your social media activity.

These are all great tips and we should keep them in mind as 2013 progresses.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

In its current state, SSB 5211 states:

It is unlawful for a person, a company, the state, or a local government to:

•  directly or indirectly require, as a condition of employment, that an employee or prospective employee submit a password or other related account information to gain access to the employee’s or prospective employee’s personal account or profile on a social networking website; or
• demand access to an employee’s or prospective employee’s personal account or profile on a social networking website.

A “social networking website” is an Internet-based service that allows individuals to: construct a public or semipublic profile in a system created by the service; create a list of other users with whom they share a connection in the system; and view and navigate their list of connections and those made by others within the system.

An employer is not prohibited from obtaining information about an employee or prospective employee that is in the public domain or from complying with the requirements of state or federal law or the rules of a self-regulatory organization.

In a civil action alleging violation of these prohibitions, a court may award a $500 penalty, as well as actual damages, attorneys’ fees, and costs. If the judge finds that the action was frivolous and brought without reasonable cause, the judge may award a prevailing defendant reasonable expenses and attorneys’ fees.

SSB 5211 hasn’t slipped through the Washington legislature without a few hiccups.  Representative Sells had proposed an amendment to SSB 5211 that would allow an employer to require a password or demand access to an employee’s personal account or profile in the event the employer was conducting an investigation regarding the employee’s personal account or profile.  The employer’s rights to the employee’s accounts was limited in scope and the employer was required to keep all confidential information learned from the employee’s accounts confidential. 

The amendment quickly made news as most commentators on the amendment criticized the amendment for defeating the purpose of the bill in the first place.  Representative Sells agreed during the April 3rd Labor and Workforce Committee and withdrew his proposed amendment.  The Committee then voted to not pass SSB 5211 and to instruct the Rules Committee to continue working on the language of the bill until it meets some of the concerns expressed by employers.

 For more information on social media and employment law, contact Chris Pothering at cpothering@scblaw.com.

Can you imagine signing into Facebook or Twitter and being notified that you had been served with a lawsuit?  That idea may not be too far out of the realm of possibility.  Courts in several countries, including Canada, Australia, New Zealand and the United Kingdom have already allowed or, in some cases, even encouraged the use of social media sites, including Facebook, as a means of alternative service of notice.

In Washington, to serve someone with notice of a lawsuit, you follow the requirements of RCW 4.28.080 and Court Rule 4 and serve the copy of the summons and complaint on the defendant personally.  Alternatively, if, after reasonable diligence, the defendant cannot be served personally, you leave a copy of the summons and complaint at their residence and also mail a copy by first-class mail to the residence or to their known place of employment.  Washington does have a statute that provides for service by publication but its applications are more limited.

Court Rule 4(h) does provide the court additional flexibility.  The rule states that “[a]t any time in its discretion and upon such terms as it deems just, the court may allow any process or proof of service thereof to be amended, unless it clearly appears that material prejudice would result to the substantial rights of the party against whom the process issued.”  Presumably, a court could allow service via social media if it decided that there would be no material prejudice to the party being served by amending the process.

Last year, a federal district court considered whether or not a party could use Facebook to serve a third party with a complaint.  In Fortunato v. Chase Bank, 2012 WL 2086950 (S.D.N.Y. June 7, 2012), the defendant Chase Bank was unable to locate a person to implead into the case.  After an exhaustive search by a private investigator and many unsuccessful attempts to physically locate her, Chase Bank asked the court for permission to serve her with notice by sending a message to her Facebook account.

Chase Bank argued that service through Facebook, as an alternative service, would meet the due process requirements just as well as publishing notifications in the local newspapers because the message was reasonably calculated to apprise her of the claims against her.  The court was unconvinced and denied Chase Bank the ability to use Facebook as an alternative method of service.  The court pointed out that it was not convinced that Chase Bank would be able to prove that the account was in fact a real account or if it had been opened by another person, using the same name or under a fake name.  Authenticity of the social media account was a key factor in the court’s decision to reject Chase Bank’s argument for their requested alternate method of service.

Fast forward less than a year and now a lawmaker in Texas has proposed a bill that will allow people to be served notice of a lawsuit via social media.  Texas has a similar (although not identical) manner for service of process as Washington, including the use of publication for alternative service.  The current rules in Texas also provide that a judge is allowed to authorize service “in any manner that the evidence… shows will be reasonably effective to give the defendant notice of the suit.”  This is a more lenient standard than Washington’s court rule which requires a court to make sure that the party being served is not materially prejudiced by a court’s amendment to the process of service.

The bill (HB 1989) currently proposed will add the words “social media” to the rule as an expressly allowed substitute method of service.  The bill provides that the person seeking to use social media as the substitute method of service will have to prove that the defendant maintains a social media account, that the profile on the social media page is actually that of the defendant, that the defendant regularly accesses the social media account and that the defendant could reasonably expect to receive actual notice if the notice of summons were sent to the defendant’s social media account.

It is an open debate on whether or not the requirements for service via social media adequately address the concerns the Fortunato court raised regarding authenticity of the social media account.  The party seeking to serve notice via social media will have to come up with evidence to support that it is indeed the defendant on the social media account in question and that the defendant maintains that page.  A party could submit evidence that recent photos have been posted of the defendant, that the personal biographical details of the account match those of the defendant, and that the profile user has recently posted or responded to recent wall posts or friend requests.  In the event this bill eventually becomes law, it will be interesting to see what the standard of proof becomes to meet the burden of authenticity.

Will Washington eventually move towards allowing service of process via social media?  There are many obstacles to consider before rushing to add social media as a means to allow service: proof of service, the potential lack of urgency communicated by use of social media, and the hurdle of authenticity that the Forunato court struggled to overcome.  However, it’s reported that currently 98.7% of Washington residents (including 83% of households) have access to the Internet[1], Washington had over 475,000 voters register to vote via their Facebook account as of July 2012[2], and at least 70% of Washington residents age 45 and older have at least one social media account.[3] And you would be hard pressed to find many people between the ages of 18 and 45 without at least one social media account.  Clearly, Washingtonians can be found online and maybe, as an additional form of alternate service, it’s more practical to find them online than to mail a summons and complaint to their last known address.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

The investment community has been erring on the side of caution to be compliant with the filing requirements of Section 24(b) of the Investment Company Act of 1940 or Rule 497 under the Securities Act of 1933 and Financial Industry Regulatory Authority (“FINRA”) Rule 2210.1, and were including all of the social media postings (Facebook posts, Tweets, etc) to be reviewed along with the more standard promotional materials.  The Financial Industry Regulatory Authority, the reviewing authority, was being deluged under all of the requests for review.  The SEC’s Guidance Update states that only those posts or Tweets that make a claim about a fund’s performance or make a pitch for a fund need to go through regulatory review. 

Facebook posts, Tweets and other social media communications that are more factual or incidental in nature do not need to go through regulatory review.  An announcement of a new fund, provided no claims of performance are made, can be Tweeted without regulatory approval.  An introduction that then provides a link to general financial and investment information does not need to go through regulatory approval.  Even a factual statement that introduces a new fund and contains a link to the prospectus (provided that prospectus is properly filed) is acceptable to post or Tweet without review and approval.

The Guidance Update should allow mutual funds and others in the financial industry to act and conduct business in the same realm as other industries.  This was a practical and welcomed move by the SEC.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

As summarized by Reuters:  

… the FTC holds online advertisers to the same standards of honesty and full disclosure as newspapers and television.

But the limited space available on mobile platforms maintained by Twitter, Facebook and others means that it is difficult to place appropriate disclosures close enough to the ad, or prominently enough, to ensure users see it.

“Advertisers should make sure their disclosures are clear and conspicuous on all devices and platforms that consumers may use to view their ads,” the FTC’s Lesley Fair said in a blog post accompanying the 53-page report.  “That means that if an ad would be deceptive or unfair (or would otherwise violate an FTC rule) without a disclosure — but the disclosure can’t be made clearly and conspicuously on a particular device or platform — then that ad shouldn’t run on that device or platform,” Fair wrote.

And the FTC discouraged the use of pop-ups for disclosures since they are so often blocked.  “Most webpages viewable on desktop devices may also be viewable on smartphones,” the FTC said in the report. “Advertisers should design the website so that any necessary disclosures are clear and conspicuous, regardless of the device on which they are displayed.”

 The FTC report contained examples of acceptable and non-acceptable disclosures, including guidance for Twitter ads.  The word “Ad,” for example, would be allowed at the beginning of a tweet. So would the word “Sponsored.” But #spon, on the other hand, is not acceptable or sufficient, because “Consumers might not understand that “#spon” means that the message was sponsored by an advertiser,” the report said. 

Advertisers also need to make sure that any advertisement that may be viewed on a mobile platform still meets the requirements of the FTC.  If the disclosure is suddenly too tiny or no longer visible, it will not be acceptable.  The same is true if the user has to scroll down off the main screen to find the disclosure. 

The FTC may issue fines to advertisers who run afoul of these rules.  And its up to the advertisers to keep up to make sure that their disclaimers are meeting the standards across all forms of technology. 

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

With 16 percent of CEOs already using social media, and that number expected to continue to climb, the Securities and Exchange Commission (“SEC”) is now faced with applying old rules to a new way of doing business.  Senior executives now regularly post on Twitter, Facebook, LinkedIn and other sites; sometimes posting interesting items about the company or employees and sometimes posting items that catch the eye of the SEC.  While the SEC itself uses social media to disseminate important information (for example: the SEC maintains four different Twitter accounts), the agency hasn’t provided much formal guidance on how public companies should use social media to communicate with the investing public. 

The security law Regulation Fair Disclosure (also known as “Reg FD”) is intended to prevent the selective release of important information to some investors, depriving others of material knowledge that would affect a public company’s stock. Since the SEC adopted the rule in 2000, public companies have generally made announcements through news releases or regulatory filings.  When a company or individual has allegedly committed a violation, the SEC may issue a Wells Notice which is a notice from the SEC that investigators plan to recommend civil charges against a public company and/or executive.

Reed Hastings, CEO of Netflix, was the latest CEO to find out that his use of social media may be a potential violation of Reg FD. In July 2012, Hastings posted on his Facebook page blog that people had watched over one billion hours of the company’s video’s in the previous month. Netflix stock soared on that news. The SEC took note and was not pleased and, on December 5, 2012, issued a Wells Notice. According to the SEC, this sort of news should have been shared in a more traditional fashion such as a press release. By sharing it on his Facebook page, which is a public page, the news was given out to “fans” which gave those people insider knowledge.

Hastings argues that the news was public once it was shared on the Internet since it could easily be forwarded, shared and reported.  He also defends his Facebook post by stating that it posted to over 200,000 people which made it very public in nature by definition and, regardless, “the fact of 1 billion hours of viewing in June was not ‘material’ to investors,” and Netflix’s stock increases on the day of his post “started well before [the] midmorning post was out,” due to a report from a positive analyst note published the night before.  Netflix had already posted on its company blog in June 2012 that it was nearing the 1 billion streaming hours milestone so Hastings’ argument that his Facebook post was “not material” may very well be correct.

Hastings is not the only executive to use social media to discuss the state of the corporation.  In May 2012, the CFO of Francesca’s Holdings Corp., which operates many popular retail stores, was fired after the company completed its investigation and found that CFO Gene Morphis was improperly posting about company information on his Facebook account.  Morphis posted personal comments about legislation, mentioned company meetings and personal commentary about various items that blurred the line between personal and business.  Morphis and Francesca’s Holdings managed to avoid SEC action but it was probably only a matter of time before the SEC would have been knocking on the door with a Wells Notice.

The use of social media by CEOs and other executives is only going to continue to grow so SEC guidance on whether to use social media for disclosures and how to use social media for disclosures is more important than ever.  The SEC’s determination of the Netflix Wells Notice is going to be under close scrutiny as issuers, executives, investors, analysts, and attorneys will all be waiting to see what the SEC decides.  If the SEC determines that Hasting’s post complied with Reg FD, will the SEC provide official guidelines on how to use social media to comply with Reg FD?

While public companies are waiting for the SEC’s determination under the Netflix Wells Notice, it is a good time for review of their social media policy, especially how it applies to Reg FD compliance issues.  If a company doesn’t have a policy that applies to its senior executives (and any other use that would invoke a Reg FD compliance issue), the company should take the time to put a policy in place to avoid receiving a Wells Notice.

It will prove to be an interesting step towards the future if the SEC decides that, not only did Hasting not violate Reg FD, but that social media can be used to disseminate information to investors, provided proper guidelines are followed.  And then if the SEC publishes the guidelines for dissemination of material information to investors through social media.  For those companies, primarily in the technology industries, who already communicate almost exclusively with investors and the public at large through social media channels, a set of formal guidelines from the SEC would be groundbreaking for securities law.  For other companies who still prefer more traditional means of communication, social media will just be yet another channel by which material information can be disseminated to investors and the public.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.

The financial industry has been requesting guidance from the FFIEC on how to use social media within the bounds of the highly regulated industry and FFIEC has responded.  There has been a concern for a long time about the use of social media within the financial industry and traders and other financial professionals stayed off of social media for several years.  However, just recently, the use of social media by financial companies has proliferated.  Banks have Twitter accounts and are amassing followers on a very large scale.  There has even been a launch of a social media analysis stock trading company called Derwent Capital Markets. 

The guidance does not impose additional obligations on banks and financial institutions, but the FFIEC does expect financial institutions to take steps to manage potential risks associated with the use of social media.

The full text of the proposed guidance on social media can be found here.  Comments are due to FFIEC within 60 days.

For more information on social media, blogging and all other commercial transaction issues, please contact Chris Pothering at cpothering@scblaw.com.