28 posts categorized "February 2013"

Antipiracy workflow [REDACTED]

Something really interesting to watch: the movie and recording industry's compact with big ISPs to police peer to peer file sharing behavior and degrade or cut off service to suspected copyright infringers - all without involving the courts or any legal process - looks like it is about to launch.

The compact involves the Recording Industry Association of America (RIAA), the Motion Picture Association of America (MPAA), member companies of those groups, and ISPs like AT&T, Verizon, Comcast and Time Warner.

Though we have previously flagged the extra-judicial nature of the content industry's policing system, we don't keep up with the story of the system's implementation. Ars Technica and TechDirt cover the topic regularly and well.

But one thing we do regularly on this blog - one of its raisons d'être - is publish or link to publicly available documents that say more than what news organizations pull from them.

The content industry's policing system will likely yield many such opportunities.

Case in point: the entity organized by the big media companies to administer the policing system - or at least the public communication aspects of it - commissioned a purportedly independent study to assess the efficacy and accuracy of the program.

Antipiracy workflow

That independent study, "Independent Expert Assessment of MarkMonitor AntiPiracy Methodologies" from Stroz Friedberg, LLC, is available online in a heavily redacted form. The illustration shown here is from the report, and one of only two illustrations in the report that were not redacted (there appear to have been seven others that have been removed).

Here's some copy from the report, as redacted, that gives you some sense of what's hidden:

"To identify infringing works, MarkMonitor personnel search for [potentially offending files] and add the results to a [database] that captures relevant metadata about each file, including its name, hash values, and size. This identified content is next reviewed manually or with automated fingerprinting technology to determine if it is an actual infringing copy of the protected work. Once the work has been reviewed, its status is updated in a [database] to indicate that it has been confirmed as an actual infringing work.

"Concurrently, identified infringing searches and torrents are deployed to [collection mechanisms]. The [collection mechanism] is a custom-built software application that runs on servers deployed in datacenters geographically spread [REDACTED]. MarkMonitor has designed the [collection mechanisms] to specifically target [REDACTED]. The [collection mechanisms] search for, download portions of, and create evidence packages or 'cases'of infringing works including (among other data points) IP address, port, time/date, size, PeerID, and hash values.

"[REDACTED] [S]cripts run to verify that the collected evidence is in fact a verified infringing work and meets all program requirements."

Even more absurdly, the report's recommendations for improving the policing system have all been redacted. See this partial screenshot of page 11 from the report.

Enhancement recommendations

To their credit, the RIAA, MPAA and ISPs have posted their compact online. Links to it and amendments that have been made available, just below. This looks like the makings of administrative law without the involvement of any elected government.

Provisions restricting assignment can be tricky

It can be tough to get a firm grip on a contract's assignment provision.

This truth was brought home again by a decision last week from the Delaware Court of Chancery, the highest court in *the* state known to set the standards in corporate law.

The case is Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH, and DLA Piper's Trent Dykes has posted to the Venture Alley blog about it.

The assignment clause at center stage in the case reads in pertinent part as follows:

"Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties . . . . Any purported assignment without such consent shall be void."

Sounds tight, no? You might expect that if the licensee sold its company to another party - and wanted to be paid in the transaction for the value of the license - the consent of the licensor would be required?

But contract law is not always intuitive and the structures of a transaction and the words written in contracts can make critical differences.

Trent links to a detailed summary of the case by his partner, John Reed, in which we find this helpful upshot:

"[T]he Court granted summary judgment that a reverse triangular merger was not an assignment by operation of law or otherwise, meaning that the acquisition of the company holding a license to valuable technology did not require the consent of the entity that granted the license."

I went to the underlying case asking myself the question, "so just what kind of assignments would require consent, under the assignment clause in the case?"

Bill of saleLet's take as a given that a purported sale, transfer or assignment of just the license itself - not as part of a merger or sale of a company - would trigger the consent requirement of the contractual assignment clause above. Let's also grant that a sale of the licensee's business, structured as an asset sale where the buyer was purchasing all or substantially all of the assets of the licensee, would trigger the consent requirement. Those kinds of transactions involve straight out assignments.

More interesting, and more problematic, is what kinds of structures are implicated when the concept of "assignment" is broadened to include the additional concept of an assignment "by operation of law." The Meso case is telling us that a reverse triangular merger is *not* an "assignment by operation of law."

Vice Chancellor Parson's opinion in the Meso case does get into a discussion of how to giving meaning to that phrase, "by operation of law." Generally speaking, an assignment "by operation of law" can be found or inferred when the party under the contractual restriction on assignment is not the surviving entity in a merger. The court stated that certain cases cited by the effective licensor "are distinguishable because they involved forward triangular mergers where the target company was not the surviving entity, whereas in this case [the effective licensee] was the surviving entity in a reverse triangular merger."

In short, the entire question of whether or not consent was required under the assignment provision may well have turned on the choice, in an M&A context, on what entity would be legally deemed to be the survivor.

Photo: Josh Bancroft/ Flickr.

Friends & rivals

If you're a regular reader of this blog, you already know what good friends Joe Wallin and I are.

We started the mobile app Startup Trivia together, collaborate on securities law reforms, and compare notes on practicing law.

We work in different firms, and our respective practices overlap, so you'd think we would be competitors; but we don't act like competitors.

Let me tell you a little story to illustrate.

Avatar-512Last week, Joe and I were walking back to our respective offices after wandering around Pike Place Market, where we had been brainstorming some nonsense or other.

JoeWallin_blogphoto_72At the northwest corner of University and 3rd Avenue, we ran into two young entrepreneurs who were making the rounds, calling on different startup lawyers in town to find an attorney to work with. "You should hire Joe," I said. "No, you should hire Bill," Joe said.

They probably ended up hiring Joe, and that is fine with me.

But there is one thing that Joe does that bugs me.

Ever since I started making the claim that this blog, Counselor @ Law, is America's #1 securities law blog, Joe sends me mail with links that show how his blog, Startup Law Blog, is gaining.

Friends & rivals

Today he told me my blog and his blog are number one and number two, respectively.

That is pretty cool, but I think he should now focus on the Meetup stuff that he does, or conquering Google+, or some such.

Best actor

I'm glad Daniel Day-Lewis won the best actor Oscar this year for his portrayal of Abraham Lincoln in Lincoln.

I'm going to see the movie again and I hope so many other people will, that Hollywood titans at the top of their craft will make more movies rooted in American history.

Imdb-lincoln-movieWhether or not Day-Lewis captured the essence of how Lincoln, the human being, projected himself in real life, he did conceive and bring forth a very compelling interpretation that makes Lincoln less God-like, and all the more remarkable. A performance like that makes what Lincoln said, and what you read about him, more accessible.

Also gratifying to see the movie won the award for best production design. There was more creativity to the movie in that regard than you find in the magical fantasy movies or cartoons.

My favorite moment in the movie, now with the distance of 3+ months from first viewing, is when Lincoln bends down to tend the fire in a fireplace in a small room in the White House, while he is talking things over with William Seward, played by David Strathairn.

Here's my initial review of Lincoln, the movie. And here's my treatment of a Lincoln-inspired movie-to-be, about a singular moment in the presidency of Theodore Roosevelt, as told by Edmund Morris.

Bus stop installation

I'm waiting for a bus this morning. Buses on Sunday morning are half an hour apart, at best, and it's windy. At least it's not raining.

To pass the time, I'm contemplating this art object, or talisman, tied to the bus stop pole.

Bus stop installation

Here's the bus! Gotta go.

Things I'm learning from an early Spring cleaning

I and my two youngest kids, who live with me, are engaged in the biggest spring cleaning of our lives.

It was difficult to get started. And while we have now worked up momentum, the pace of our culling is not quick, only deliberate.

Things I'm learning from an early Spring cleaning

Half a dozen trips to Goodwill, as many to Half-Price books, three to Total Reclaim, two to the dump, and daily relentless recycling of paper, collectively yield the following working theories:

  • There are hundreds of CDs and scores of DVDs in the house. I listen to and watch none of them. They can all go. I won't miss a single one!

  • About half the vinyl records are worth keeping. Vinyl is the only reason to have loudspeakers.

  • There is no such thing as too many FM radios.

  • Three quarters of the books in the house, no one in the house will ever read. We simply won't. We'll go to the library or buy new books before we read three quarters of the books in the house.

  • I like the idea of art coffee table books but I haven't even ripped the plastic shrinkwrap on some of them.

  • When you (read, your children) let friends store their bikes, books, art projects, clothing and other personal possessions for the summer, you may not be doing them or your self any favors.

  • There is no service more important to a household than robust broadband. Well, except maybe water. And electricity.

  • If you (read, me) can keep your weight from fluctuating +/- 30 pounds, you won't need half your clothing.

Photo: Bianca Nogrady / Flickr.

Diligent crowdfunding

Over on the CrowdCafe this week, Jonny Sandlund is trying to make sense of "due diligence" in the context of investment crowdfunding.

The first thought that may come to mind may be, "hey, isn't the point of crowdfunding that the crowd vets the deal?" But, reading Jonny's post, you start to appreciate that the very presentation of a deal on a platform - first, the fact that it is listed, and then, the manner in which information about it is presented - is likely the byproduct of a process of some manner of diligence, selection that precedes the vetting of the crowd.

DiligenceThe implications of the questions Jonny is asking - "Who’s doing the diligence: the Crowd or the Platform? When in the process? And how?" - moves right to the heart of the regulatory conundrum that has not been resolved for non-accredited investment crowdfunding under Title III of the JOBS Act, and that may have been re-activated for angel crowdfunding platforms with the recent SEC staff FAQ that totally mangles the federal broker dealer exemption under Title II of the JOBS Act.

For Title III crowdfunding, the trend seems a regulatory push toward, and the nascent industry's acquiescence with, the need for funding portals to be regulated more or less as broker dealers. If even elements of web design or going to be regarded by regulators as "investment advice," then there is little point in trying to defend a notion of "curation" that is independent of engaging in securities transactions.

We had thought "curation" survived under Title II and that, for platforms restricted to accredited investors, the aggregation of diligence chores was natural; the FAQ from SEC staff this month may be throwing those beliefs into uncertainty. The statutory language of Title II yet expressly contemplates that angel platforms may provide "ancillary services," including "due diligence" services.

But over in Title III, it's clear that funding portals are expected to do a fair amount of protecting of an investor, against the listing issuers and also, ironically, against the investor himself (the portal is, in effect, supposed to diligence the investor's crowdfunding limit across all platforms).

Photo: fhwrdh / Flickr.

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