Monthly Archives: October 2013

Startup Law: Congress Clearing Way For Crowdsourcing Stock Investments?

Crowdsourcing Stock Investments
The SEC is making moves to allow startups to sell investment opportunities on the Internet.

Startups may soon be able to sell stocks online. Yep, crowdsourcing stock investments has arrived.

Let’s review the SEC’s proposal and take a look at what online stock selling would look like.

What Law Made It Possible For Crowdsourcing Stock Investments?

In 2012, to stabilize the economy after it careened off 2008’s rails, officials passed the JOBS Act. Title III addresses crowdfunding issues and allows inchoate companies to directly solicit online investments.  Specifically, the online securities provision “permits companies to offer and sell securities through crowdfunding.”

The JOBS Act gives the Securities and Exchange Commission authority over certain aspects of online stock selling, and earlier in the month the commission unanimously voted to release their online security selling rules proposal for public comment.

What Are The Commissioners Suggesting? Here’s the rundown:

  1. If you make less than $100,000 a year, than you can invest either $2,000 or 5% of your income – whichever is more.
  2. If you make more than $100,000 a year, you can invest either $100,000 or 10% of your income – whichever is less.
  3. Companies soliciting investors must provide a business plan, in addition to the names of officers, directors and people who own at least 20% of the company, to potential purchasers.
  4. Startups are allowed to raise $1 million without registering with the Securities and Exchange Commission.

The proposed provisions will go a long way in helping smaller startups, which traditionally have difficulty securing audiences with venture and angel capitalists, get off the ground. Moreover, the measures unburden the SEC of time consuming, process stalling paperwork.

What Are The Drawbacks Of The Proposed New Crowdsourcing Stock Investments?

The One Thing You Won’t Be Able To Do With Online Securities

If you’re thinking of starting an investment fund by way of the new rules, think again. Raising money for online securities is not allowed. Sorry.

No law is perfect. And yes, fraud is possibly under the proposed framework; But, as SEC Chairman Mary Jo White explained, “There is a great deal of excitement in the marketplace” over crowdfunding. We want this market to thrive, in a safe manner for investors.”

Get In Touch With A Tech Startup Lawyer

Are you launching a startup? Do you want to explore selling investment stocks through crowdsourcing? If so, get in touch. Kelly Warner is a full service law firm that focuses on the needs and realities of online and tech sector businesses.

Can I Sue For Defamation Over Gaming Smack Talk?

hand with cards to represent poker game that devolved into defamation lawsuitSometimes competition is friendly, sometimes it’s downright nasty, and sometimes you end up in court.

Two poker players in Namibia let it get to the lawsuit level, and now one has to pay the other over full tilt trash-talking.

Adriaan Christiaan Byleveldt and Lance Cotterell played a poker game. Things got heated; words were exchanged. But instead of leaving the beef at the table, the conflict lingered after the last card was laid, culminating in Byleveldt calling Cotterell the Afrikaans word for the female anatomy in a mass email.

Now, defamation laws in Namibia aren’t quite as free speech friendly as they are in the United States. And believe it or not, Cotterell won the email defamation lawsuit! The judge awarded him 10,000 Namibian dollars ($1,025 US) in damages. The judge also made Byleveldt pay Cotterell’s legal fees.

Byleveldt, however, is refusing to pay — which is causing him some additional legal problems.

If you’re wondering if this case would have turned out differently in the United States, the answer is yes. Simply calling somebody a name won’t get you far in an American defamation lawsuit, but it may in another jurisdiction.

To learn more about international defamation laws, check out our slander and libel database. If you need to speak with an attorney well-versed in international online defamation law, get in touch.

Antigua and Barbuda: Copyright Free Capitol of the World?

copyright-lawyer Antigua and the United States have long been entangled in an Internet law “trade war.” Online gambling and copyright protections figure at the center of the dispute. Antiguans were (and still are) upset about U.S. online gambling sanctions because the ban sucker-punched its economy. Meanwhile, the U.S. is upset that Antigua is threatening to remove all American copyright protection measures in their country as retaliation for the gambling ban.

The Antiguan government is unveiling a plan to “monetize” or otherwise “exploit” U.S. copyrights. Prime Minister Baldwin Spencer expressed support and gratitude for the committee that quickly drafted a workable proposal. Also — (perhaps in an attempt to alert overseas investors with a yen for Caribbean tax shelters) – Baldwin mentioned that the new Antiguan plan would be open to “private sector participation in the platform.”

Do you think Antigua is over-reacting? Maybe, but they have a legal right to do so. In 2007, The World Trade Organization sided with the Caribbean nation, granting them the authority to “ignore certain WTO commitments to the U.S., including those related to intellectual property rights protections.”

A spokesperson for the office of the U.S. Trade Representative cautioned that any extreme measures taken by the Antiguan government would “damage Antigua’s climate for investment and innovation.” Frankly, we’re not sure the assertion is accurate. After all, U.S. investors aren’t the only game in town. And let’s face it: a lot of profit-minded people (and pirates alike) – both at home and overseas – are not going to pass up a copyright free zone on principle.

The trade representative spokesperson also pointed out that the U.S. made amends with every other WTO member nation. Ironically, the feds may be inadvertently helping Antigua’s marketing efforts. After all, they’re highlighting its status as the only jurisdiction with copyright-dodging capabilities.

Why is Antigua obsessed with the online gambling issue? Before Internet gaming, online gambling was the island nation’s second largest employer. When the ban hit, the Antiguan economy tanked.

Are you a business person interested in international startup options? If so, contact Kelly Warner Law. We help online startups determine the best business formation and operation options for their company.

Dating Site Sued Competitor For Defamation

academic defamation lawsuits
An online business thought their competitor was behind a so-called “suck site”, so it sued.

A pair of mail-order bride websites – Anastasia International and EM Models (dba, Elena’s Models) — went toe-to-toe in court. By way of a lawsuit, Anastasia accused EM of false advertising, trademark infringement, and defamation, alleging the latter commissioned a so-called “suck site,”  EM Models denied the claim. In the end, a judge sided with the defendant because the plaintiff couldn’t produce enough evidence.

Dating Site Sues Competitor For Defamation

Anastasia International is a fee-based online dating service featuring women from Russia and Ukraine. It’s based in Kentucky, with offices in New York. In May, the site filed a lawsuit against a competitor, EM Models. Why? Well, executives at Anastasia were convinced that EM had paid Juha Natunen to create, a website accusing Anastasia’s women of stringing men along with the intention of “breaking their hearts” in the end.

Anastasia sued for defamation, false advertising and trademark infringement.

Could A Link On The Suck Site Work In Favor Of The Plaintiff?

Apparently, when Anastasia International filed the lawsuit, someone removed a link on that led to EM Models. During the proceedings, the judge said the removal of the link was the “strongest factual claim bolstering [Anastasia’s] argument” that EM paid to have the site created. In the end, though, the judge decided that “such an allegation of temporal proximity is not enough to show any connection or communication whatsoever, let alone an agency relationship, between Juha Natunen and EM Online. In other words: a link is not proof enough that EM hired Natunen to build the site.

The court ordered Anastasia to pay Elena Model’s attorney fees.

Vengeance Is Not A Good Look

“Hey, why didn’t Anastasia sue the website operator, Juha Natunen, for defamation instead of just suing competitor EM Models?” If that thought crossed your mind, you’re not alone. The judge in the case considered this question, ultimately reasoning that Anastasia’s refusal to drop EM Models from the lawsuit smacked of “a competitive ploy.”

Finance Firm Says SEC Is Slander Happy, So It’s Suing.

business law
A financial firm sued the SEC over a field exam. The finance firm says that SEC harassed investors and slandered the firm during an investigation.

Arjent LLC, a boutique finance firm with domestic and international outposts, sued the Securities and Exchange Commission for harassment, slander, concealment of an investigation, and deprivation of the right to counsel. Furthermore, the financial group claimed the SEC unfairly targeted small firms.

Why Is An Investment Banking Business Suing the Securities and Exchange Commission?

In 2011, the Securities and Exchange Commission (SEC) launched a routine field investigation into Arjent LLC. According to the lawsuit, the financial firm’s CEO, Robert P. Depalo, complied with all requests. Regardless, the SEC continued to hound Arjent for additional information.

Perhaps not wanting another Enron Chewco embarrassment, field investigators seemed particularly interested in three financial entities listed as “outside business activities” for several Arjent employees – Brookville Fund Managers, Brookville Special Purpose Fund LLC, and Pangaea Trading Partners LLC. But, according to the claim, “despite Mr. DePalo’s good faith cooperation with the Voluntary request, SEC staff remained unsatisfied and intensified its examination.”

Then SEC staffers contacted investors. And according to the plaintiff, in the course of doing so, “slanderously insinuated to investors that Mr. DePalo illegally withdrew investor funds from Pangaea Trading Partners LLC.” The claimant also avers that the SEC “purposefully concealed the existence of a Formal Order of Investigation (“FOI”) while interviewing Mr. DePalo.”

Weary of the investigation and what he felt was misconduct on the part of SEC examiners, DePalo filed a finance defamation lawsuit.

Are Small Finance Businesses Targeted?

In the filing, Arjent suggest that the SEC purposefully targets finance firms with less than 1,000 employees. A lack of in-house legal staff, claims Arjent, is the SEC’s sneaky impetus for stalking the small.
Why would the SEC rather investigate finance firms without in-house legal? Because the department thinks they’ll have a better chance at winning, which will help burnish the allusion of “effective regulation” into the public consciousness.

What’s Next in This Business Defamation Lawsuit?

Undoubtedly, an army of federal lawyers – and perhaps private consultants – will attack this case. And as is the case with most everything government-related, red tape will play a prominent role. Expect it to last a long, long time.

Get In Touch With A Lawyer That You Can Keep On Speed-Dial In Case of Emergency

Kelly Warner handles all manners of business defamation lawsuits. Our philosophy is simple: keep it under the radar and get it done. Because the more time you spend litigating, the less energy you have for profit generating. Beyond that, public dirty laundry is usually not a good look.

Contact us today to begin the confidential conversation.

Total Biscuit and Wild Game Studio are Beefing

game developers: wild Game v Total Biscuit beefWild Game Studio is going toe-to-toe with venerated game reviewer, John Bain, a.k.a., Total Biscuit. Day One: Garry’s Incident, a first-personal survival game, anchors the controversy.

The beef began when Wild Game gave Total Biscuit a copy of Day One to review. Unfortunately, Total Biscuit wasn’t impressed and let his criticism rip. “I just feel that companies that don’t have enough practice should, under no circumstances, be attempting something as complex as an open-world first-person survival game,” opined Bain. “Because it will just be dreadful, and this game is astonishingly bad,” he concluded.

Wild Game wasn’t thrilled.

To mitigate the negative onslaught, the studio issued an infringement complaint against Bain, citing advertising on his site as proof of unjust enrichment.

As is often the case, the peanut gallery is split. Some developers are enjoying a bit of schadenfruede, while pirate sympathizers aren’t impressed.

Former RAF Expert Wins Defamation Suit Against The Mail on Sunday

Mail on Sunday defamation case studyA former Royal Air Force expert won a defamation lawsuit against the Mail on Sunday. Dr. Joel Howard, a defense and securities expert, sued the newspaper over  a 2011 article knighting him the “Ayatollah of the RAF.”

Former Pilot Sued Mail On Sunday For Defamation

A native New Zealander, Hayward converted to Islam during his tenure as head of the Royal Air Force pilot training college. According to the article, after his conversion, Hayward allegedly instructed students to go “softly-softly” when writing about Islamic terrorists.

Offended, Hayward sued the Mail on Sunday. He also left his position at the RAF and took a job at Khalifa University in the United Arab Emirates, where, he says, the atmosphere is much more friendly to Muslim converts.

Judge Ruled In Favor Of Pilot In Mail Defamation Lawsuit

It took two years, but the court reached a decision this week. The ruling body sided with Hayward, ordering the Mail to pay damages. According to Hayward, the award amount wouldn’t land him on a “rich list” but he hopes it will make the Mail “think twice.”

Are you interested in international defamation? Check out the Kelly Warner International Defamation Law Database. Do you need an international defamation law attorney? Get in touch with founding partner, Aaron Kelly.

International Defamation: Criminal Defamation In Ecuador

An international defamation lawsuit out of Ecuador caught our attention.

In brief, the three-term (and counting) president of the country, Rafael Correa, filed a defamation suit. He won and the defendants landed in jail for 18 months. Supporters of Correa say the case was justified and appropriate. Detractors argue he inappropriately used his political power to silence critics.

Why Did Correa File A Defamation Lawsuit Against A Political Opponent?

In 2010, a violent demonstration rocked Ecuador. If you believe the opposition, it was a justified, non-violent protest waged by government workers demanding fair pay. If you believe Correa enthusiasts, it was an “undemocratic coup d’etat.” Whichever the case, the incident turned violent. Rebels held Correa hostage at a police hospital, and five civilians died when soldiers rushed the facility to rescue the president.

In the aftermath, opposition leader Jose Clever Jimenez Cabrera (commonly known as Jimenez) publicly ridiculed the ruling party and Correa for “promoting political chaos” and “perpetuating crimes against humanity.”

As you might imagine, Correa didn’t take kindly to the accusations. In fact, he filed a defamation lawsuit against Jimenez and two union leaders.

International Defamation Watchdog Group Chastises Correa

To shorten a long story, Correa won his case. And since Ecuador still has criminal defamation laws, the defendants landed in the clink for 18 months. Additionally, the judge ordered Jimenez to pay the president $145,000, plus publicly apologize.

Upon hearing the ruling, international first amendment advocates, Human Rights Watch, issued an excoriation. Jose Miguel Vivanco, director of Human Rights Watch America, fulminated, “President Correa has long made it clear that he willing to go after anyone who criticizes him, from civil leaders to media critics.”

A Defiant “Defamer”

Jimenez refused to comply with the public apology demand. We’ll see if his prison sentence is extended, as a result.

Defamation Law: Can Lie Detector Tests Be Used By Defense?

rendering of a lie detector machine
Can lie detector tests be used as evidence in defamation lawsuits?

Last week, we blogged about a doping-related defamation lawsuit waged by former MLB player Albert Pujols. Welp gang, it looks like Jack Clark, the defendant in the case, is fighting back. And he is hoping a lie detector test will further his cause.

Quick Catch-Up: Why Is Pujols Suing Clark?

So how did this sports defamation battle begin? As is the case with many baseball-related legal battles, the kernel of discontent is a doping accusation. On his radio show, Clark insisted Pujols took performance enhancing drugs. Pujols denied the claims and sued Clark for defamation.

Clark’s Response To Pujols Defamation Lawsuit

Instead of lying low, Clark hit back with a response letter. In it, he stood by his statements, squabbling over the use of the term “juiced” and whether or not it absolutely conveyed, “illicit drug use.” Semantics aside, the former St. Louis Cardinal also challenged Pujols to a lie detector test. (If only “The Moment of Truth” was still on!)

If Clark Did Pass A Lie Detector Test, Is That Enough To Get Him Off The Defamation Hook?

Offering to take a lie detector test is proof positive that a person is telling the truth, right? Not so fast. While a lie detector is a good indicator, it’s not foolproof. As we learned from “Ocean’s Eleven,” anybody can train themselves to pass a polygraph — even when they’re lying.

Moreover, scientific studies have concluded that lie detectors are inaccurate. In fact, polygraphs are so controversial that some  jurisdictions don’t allow polygraph results to be submitted as evidence. Yes, each state has their own set of lie detector laws, and federal judges exercise discretion when deciding to admit a given test.

But What If Clark Is Telling The Truth? Can He Win The Case?

Truth is a clear and accepted defense against defamation. As the old saying goes, “it’s not slander if it true.”

However, if plaintiffs can provide superior evidence than defendants, it’s possible for a lie-telling plaintiff to win a defamation lawsuit.

Are you in a defamation bind? Need to speak with a defamation attorney? Contact Kelly Warner Law.

A Reptilian Conspiracy Theorist Once Sued Google For Defamation

Reptilian conspiracy theorist once sued Google for defamation.
Reptilian conspiracy theorist is suing Google for online defamation.

Artist-cum-conspiracy theorist Uri Dowbenko once sued Google for defamation. His chances of winning the case: slim. The case’s E.Q. (entertainment quotient): sky-high. This is the story.

First, A Little About Uri

Dowbenko is also an artist who built a following around Miami.

Unafraid to represent the ostensibly outrageous, Mr. Dowbenko is also a believer (or at least was) in both the “New Reptilian World Order” and “Pat Robertson is an undercover Satanist” theories.

Around 2013, Ari’s art sales slipped. And according to him, the vicissitude involved a website, the Encyclopedia of American Loons.

Satirical Site Leads To Ruined Reputation?

A Blogger outlet, the “Encyclopedia of American Loons” is a satirical site about the, shall we say, more fringe-thinkers among us. Uri Dowbenko is entry # 111.

Skeptical of Dowbenko’s scientific vigor, the Encyclopedia of American Loons deemed him a “batshit insane tinfoilhatter, who is lacking any capacity to rationally evaluate science.” Not all negative, the website also dismissed Uri as “probably harmless” and praised him as “rather entertaining.”

Google Is To Blame For Professional Slump?

According to Uri, one day an epiphany slapped him on the head: The Loon Encyclopedia unfairly crushed his artistic standing! His prolific writings were not to blame!

Despite American Loons’ low SERP rank, Dowbenko ignored the Streisand effect and took action.

He wasn’t interested, however, in suing the authors of the blog. Instead, Uri decided Google was to blame. In fact, he believed Google purposefully and intentionally manipulated the #1 search engine in the world in an effort to ruin his reputation.

Dowbenko Once Sued Google For Defamation. Did He Win?

Did Uri win? No. A judge isn’t going to hold Google responsible for a third-party blog on Blogger. That is what Section 230 of the Communication’s Decency Act is for, to protect website portals from liability over user content.

Comparative Internet Law: Website Defamation Liability, U.S. v. EU

comparative internet law: EU v US website defamation liability

Section 230 Protections Weakened In WA, NJ, and TN (For A Minute)

Section 230 of the Communications Decency Act is a significant Internet law. It gives defamation immunity to website operators when users post defamatory content. Pundits credit the statute for allowing innovation to triumph, because it gave developers leeway to experiment with interaction. To put it another way, without Section 230, social media would not exist today.

But there’s always a flip side. Section 230 of the CDA does pave an easier path for arguably corrosive platforms, like child and revenge porn websites. So, in an effort to combat such sites, attorneys general from several states have quietly waged a war on Section 230.

The outcome? Washington and Tennessee succeed in passing laws that ultimately dismantled the safe harbor provisions in the CDA.

Those laws, however, didn’t last. – a free classifieds site – moved forward with several lawsuits that questioned the constitutionality of the statutes. Ultimately, Backpage emerged victorious. Why? Perhaps the Tennessee trial court judge said it best:

The Constitution tells us that when freedom of speech hangs in the balance — the state may not use a butcher knife on a problem that requires a scalpel to fix. Nor may a state enforce a law that flatly conflicts with federal law. Yet, this appears to be what the Tennessee legislature has done in passing the law at issue.

U.S. State Attorneys Wage Low-Key War on Section 230

In early 2013, New Jersey tried to tackle the child pornography problem by hobbling Section 230. But like Tennessee and Washington before it, the court struck down the statute. 

Judges reasoned that section 230 is meant to make things “safer” online. But the NJ law included a loophole that belied said goal. How? Well, the law indicated that websites must have knowledge about the offending material to be held responsible. In a way, it gave websites an excuse, if not an impetus, to look the other way.

EU Website Liability: Court Says Websites Are Responsible For User Comments

Our friends on the other side of the Atlantic have different Internet laws. In fact, earlier this month, the European Court on Human Rights effectively placed the onus of defamation liability on website operators – the exact opposite of Section 230 of the CDA.

Delfi AS v. Estonia: EU Officials Say Websites Are Responsible For Anonymous Posters’ Comments

In 2006, Delfi — the CNN of Estonia — ran a story about a ferry company’s contentious decision to change routes. Outraged by the news, angry customers took to Delfi’s website and let the insults rip. Death threats and insults flooded the page.

Business dwindled and the ferry company sued Delfi over “highly offensive or threatening posts about the ferry operator and its owner.” In 2008, an Estonia court ruled in favor of the ferry company and ordered Delfi to pay 360 euros worth of damages.

Despite the small amount, Delfi kept fighting and took the issue to the EU governing body. The news portal argued it was a “passive and neutral” conduit, as outlined in the European E-commerce Directive, and should not be liable for users’ comments.

Pundits were sure that Delfi would win, but the European Judicial Board handed down an unexpected decision, in favor of the ferry company. In short, the European Court’s ruling was — and remains — alarming. Why? Because it jeopardizes anonymous speech, an essential component of healthy democracies.

Why Did The EU Court Rule Against Anonymous Online Speech?

How did the European Court come to its decision? It reasoned:

  1. It’s the responsibility of “domestic courts” to interpret violations of domestic law. As such, the Estonian court was in compliance with the “prescribed by law” requirement of the EU convention.
  2. Under convention rules, member states can put limits on freedom of expression if it is to protect a person’s reputation, so long as interference is “proportional.”
  3. Delfi should have anticipated the offensive posts and “exercised an extra degree of caution.”
  4. Despite the existence of a disclaimer saddling posters with full liability for their posts, plus a note banning “threatening and defamatory” comments, the site failed to remove certain posts, but did others. Judges considered the inconsistency.
  5. Yes, the ferry company could have sued each commentator individually, but since users could register without providing identifying information, it was “reasonable” and “practical” for the ferry company to proceed with a claim against Delfi.
  6. Damages were small, plus the order didn’t include speech-limiting language.
  7. The paltry amount of 350 euros was appropriate and “proportionate” to the violation.

Why EU Rulings Matter For U.S. Websites

You may be thinking, “My website is in the U.S., I don’t have to worry about legal shenanigans on the other side of the Atlantic.”

Think again.

Website operators in North American absolutely need to consider European Internet laws – because digital packets don’t recognize political boundaries. As Tim Worstall said, “commentary is to be judged by the jurisdiction where it is read, not where it is written or hosted.”

Now, if you don’t have assets in a given foreign jurisdiction, you have little to worry about. But if your goal is growth, in today’s world, paying attention to global happenings is a must.

Do you need the help of an Internet law attorney? Kelly Warner focuses on all things online business. Get in touch today to begin the conversation.

Michigan Cyberbullying Law? It May Happen.

Michigan cyberbullying law
Is Michigan well on its way to passing a cyberbullying law?

A Michigan cyberbullying law? It may happen soon. Last week, The State Senate Judiciary Committee approved a new amendment to its 2011 anti-bullying statute – a statute which requires schools to develop a plan to protect students from harassment, intimidation, and physical violence.

What Will The Michigan Cyberbullying Law Do?

If gaveled into law, the statute will officially recognize online bullying as a form of actionable harassment. Public schools in the state will have to develop procedures to protect students from cyberbullying and submit annual reports about the status of their prevention programs.

When asked for comments about the bill, sponsor Sen. Glenn Anderson expressed his pleasure with the pending regulation and explained that, these days, Internet bullying is far more pervasive and damaging than “face-to-face” bullying.

Family of Bullied Teen Spearhead’s Michigan Online Harassment Amendment

The new bill was spearheaded by Kevin Epling, father of Matt Epling who tragically took his own life at 14 after being cyberbullied by students at his school.

The Eplings started BullyPolice USA – a non-profit that addresses issues related to Internet harassment. When asked about the possible new law, the Eplings expressed seemed pleased.

Sadly, the family also took time to reminded the public that their family wasn’t the only Michigan family to suffer through a cyberbullying suicide; 25 to 30 families in Michigan alone have had to deal with the nightmare.

Potential Problem With Michigan’s Cyberbullying Law

Legally speaking, what makes the Michigan cyberbullying bill interesting is that the state is essentially giving schools permission to regulate their student body off campus. After all, Internet harassment and cyberbullying can happen any time of day – at school, at home and anywhere in between.

In theory, the reach of the legislation could spark a contentious constitutional legal battle. It will be interesting to see if a lawsuit spawns from this new law if it passes.