Happy Holidays From All of Us to All of You
Seasons Greetings
Thank you for reading and visiting Legal Bytes. Each year, at this time of year, I try to post messages in the spirit of the season and often some of my own reflections at the end of one calendar year, looking forward to a new year ahead. This year I’ve chosen a story about Franz Kafka. When I recall reading Kafka (forced by required reading in school), I think of the “The Metamorphosis” and a giant cockroach or works that exude alienation and hopelessness or surreal worlds filled with bureaucracy and despair. Not, as I recall, filled with compassion, love or kindness. But having started reading books again and publishing Light Byte quotes for my blog, I came across both a quote and a story that surprised me.
“Youth is happy because it has the capacity to see beauty. Anyone who keeps the ability to see beauty never grows old.” Yes, this is a quotation from Kafka. It surprised me. But there was also a story – perhaps only a legend – about Franz Kafka in the last year of his life – Kafka died in June of 1924. There appear to be multiple versions and variations to this story and many claim to have gleaned details from Kafka’s last wife, Dora Diamant. She would have been the only one who would have possibly known most, if not all of it, if true. We may never know if any version is true , but whether fact or fiction, the story, like all of Kafka’s writing, is complex, nuanced and meaningful on so many levels and for so many reasons, permit me to share it with you:
Franz Kafka, a literary genius widely regarded as one of the major figures of 20th Century literature, was a young man suffering from tuberculosis and dying – he was never to see his 41st birthday. He had recently fallen in love with Dora Diamant, a young girl of nineteen or twenty who ran away from her Hasidic family in Poland and now, as a married couple, they were living in Berlin. Most afternoons Kafka would go for a walk in Steglitz Park, often accompanied by Dora, and one day, Kafka came upon a little girl in the park, immersed in tears and sobbing her heart out.
Kafka inquired what was troubling her, and she told him she had lost her doll and was heartbroken. Trying to make her feel better, he offers to help look for the doll, but fearing the worst, he decides to tell her the doll has gone away, but has written her a letter. When she asked to see it, he told her since he didn’t know he would meet her in the park that day, he had left it at home, but would bring it to her the next day. Now if this story has any truth to it, I’m guessing this little girl was probably more than just a little suspicious at that point. But Kafka promises to return the next day with the letter from the doll – a letter he then goes home to compose.
The next day Kafka returns to the park with the letter and finds the little girl waiting. She is too young to read so he reads the letter to her. He tells her the doll is sorry, but had gotten bored and needed to get out, see the world, do new things and make new friends. Of course, she still loves and misses the little girl very much, but her dreams of new adventures and of seeing new things has made her decide to go away for a while to do just that. But, as Kafka told the little girl, the doll promised to write her every day so she can follow her activities and know she is thinking of her.
According to the story, from that day and every day for at least the next three weeks, Franz Kafka – one of the most brilliant, talented writers in literary history – goes home to write letters from the lost doll. Every day, in the last year of his life, knowing his remaining days on earth are dwindling, he composes these imaginary letters from a lost doll. Every day he returns to the park to read them to the little girl – a stranger he didn’t know, had never met before and whom he had run into by accident one afternoon in the park.
According to reports from Dora, he would sit down at his desk, composing letters about the doll’s adventures that were detailed, funny and captivating. According to accounts of the story, when writing these letters Kafka dedicated himself with the same seriousness as he had when composing his own towering literary works. Fictional letters from a lost doll, intended to replace a little girls sadness with believable joy. So every day, Kafka returned to the park to read another letter to the little girl. As the weeks went by, knowing all to well his time on earth was nearing an end, Kafka must have also been struggling with how to end this story – the moment when the letters must inevitably stop and he could no longer return to the park to read them to her.
Here is where versions of the story diverge. In one version, the doll grows up, goes to school, gets to know other people, falls in love, has a wonderful wedding and goes off to live happily ever after, somewhere in the countryside with the doll’s new husband. In this version, she bids farewell to the little girl, knowing everyone will live happily ever after. In another version, Kafka presents the little girl with a doll – which clearly looks different than the original – which he notes, in the doll’s words: “my travels have changed me…”
We never learn what the little girl may have thought at the time, but as the story is told, many years later that little girl, now all grown up, reportedly finds the cherished doll given to her by Franz Kafka to replace the one she lost. Stuffed somewhere in a previously unnoticed spot was a final letter from the doll, which ended with the words “every thing that you love, you will eventually lose, but in the end, love will return in a different form.”
Wishing you, your family, friends, colleagues and all those you hold dear, a joyful and meaningful holiday season, a prosperous and healthy new year filled with peace, and most of all and in all its forms . . love.
The Blockchain Ecosystem
Dror Futter, a Venture Capital and Technology Partner at Rimon, P.C. has authored a comprehensive update on the state of blockchain law, which has been published by The Journal of PLI Press, the quarterly journal of the Practicing Law Institute The Current, (Winter 2018 Edition; Vol. 2, No. 1, Winter 2018 – Page 21. The article summarizes developments in the blockchain ecosystem to date, draws attention to considerations that participants in that ecosystem should take into account and also highlights many currently unanswered legal questions.
In addition to a growing blockchain practice, Mr. Futter focuses his practice on startup companies and their investors, and has worked with a wide range of technology companies. You can read the entire article right here: Blockchain Law ICO Regulation and Other Legal Considerations in the Blockchain Ecosystem and if you need more information you can contact Mr. Futter directly or if you want to know more about his practice click here. Of course, you can always contact me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work.
All Good Things Must . . . .
So far this year, offerings of blockchain based tokens have raised over $3 billion and for a long time regulators seemed to be ignoring these Initial Coin Offerings (ICOs). Indeed, some commentators asserted they were outside the scope of government regulation.
This past summer, the Securities and Exchange Commission (SEC) began to take aim. While the SEC has not yet provided detailed guidance as to which tokens would be categorized as securities and which considered “utility tokens” (outside the SEC’s jurisdiction), the SEC has indicated such tokens can be securities, basing its determinations on a ‘facts and circumstances’ analysis. Having said that, SEC Chairman Jay Clayton reportedly deviated from prepared remarks earlier this month and said: “I have yet to see an ICO that doesn’t have a sufficient number of hallmarks of a security.”
Since the summer, China and South Korea have banned ICOs, while Canada, the UK, Switzerland, Australia and most recently the EU, issued SEC-like guidance stressing that tokens may be securities and as a result, subject to the oversight of securities regulators.
In addition, the first lawsuits related to ICOs have now been filed, reminding us that regulatory action is far from the only legal risk faced by ICO sponsors of ICOs. In one of the current lawsuits, only one of the claims is for the sale of unregistered securities, while other claims include allegations of fraud, false advertising and unfair competition under State law. Civil suits by disappointed investors and class action lawsuits relating to large scale offerings are likely to increase in the months and years ahead.
While recent developments don’t foretell the end of ICOs, they highlight more than the typical significant legal and regulatory risks associated with early stage venture investing. Indeed, investors may not be able to rely on the same types of legal protections they might obtain when acquiring conventional securities. Even after the initial issuance of these ‘tokens,’ their resale could raise even more issues and compliance may affect liquidity and valuation. In an uncertain regulatory environment, risk mitigation is an important element of counseling clients, but hardly a basis for avoiding risk altogether and clients and their lawyers have good reason to be cautious. In fact, even creating an impression that an ICO has been ‘blessed’ by lawyers may not make it clear that opinions have a significant level of assumptions, qualifications and caveats well beyond routine legal opinions.
This posting was adapted and extracted from a more detailed Client Alert written by Dror Futter, a New York-New Jersey based Partner at Rimon, P.C. You can read the entire alert, entitled “Spoiler Alert: ICOs – The “Good Times” May Be Ending,” and if you need more information, feel free to contact Dror Futter directly. As always, if you need any assistance you can always contact me, Joe Rosenbaum, a New York based Partner at Rimon, or any of the lawyers at Rimon with whom you regularly work.
US-EU Data Transfer Privacy Shield
Being referred to by the European Union as the most important change in data privacy regulation in 20 years, the new EU General Data Protection Regulation (GDPR) comes into effect on May 25, 2018. There is even a ‘countdown’ clock on the website and under the GDPR, “Personal Data” means information relating to an identified or identifiable natural person (including email addresses, telephone numbers, addresses and IP addresses). While the European Commission has determined a number of countries already meet the ‘adequate protection’ test, the United States is not one of them!
As most readers of Legal Bytes already know, personal data cannot be transferred to from the EU to a non-European Union/European Economic Area country, unless that country can ensure “adequate levels of protection” for such personal data.
As background, in July of 2016, a new framework for the movement of personal data between the EU and the US was finalized – EU-U.S. and Swiss-U.S. Privacy Shield Frameworks – which was put into place in an effort to meet the requirements of the EU Data Directive. However, critics noting the holes in that framework, have generated increasing concern as the 2018 effective date of the new EU GDPR approaches. A few months ago, immediately following the inauguration ceremony, President Trump issued United States’ Executive Order 13768 (January 25, 2017) that has created even greater concern. While it is possible a new or refined agreement and framework may be put into place in the months leading up to 2018, there is no certainty.
What do you need to know? What should you consider doing now? My colleague Jill Williamson has written an article which has been published in Risk & Compliance Magazine, entitled “The Fragile Framework of the Privacy Shield“. If you want to know more about the privacy and data protection implications of the new framework, its potential risks to your business and what you should be considering as you look to the future, feel free to contact Jill Williamson directly. Of course, you can always contact me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work.
FTC Warns Celebrities Over Social Media Endorsements
Two weeks after presenting Keys to Celebrity & Paid Endorsements in Social Media at the ABA Business Law Section Spring Meeting, the Federal Trade Commission has sent out over 90 letters to celebrities, athletes, marketing firms and other influencers, warning them to clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media (see, FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship). An advocacy group, Public Citizen, which petitioned the FTC to act, said Instagram had become “a Wild West of disguised advertising” and in connection with its own investigation last year, named celebrities including Kim Kardashian and Rihanna, among over 100 influencers who the group claimed made endorsements without proper disclosures.
The potential for misleading consumers was raised after a review of Instagram posts reviewed by the FTC, recognizing that if consumers knew that a celebrity was being paid, gained a benefit or was somehow associated with the product, service or brand, it may well affect their perception and the weight accorded any claims made through such endorsements. As mentioned in the presentation to lawyers at the ABA meeting, the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising applies to individual endorsers, as well as to bloggers, marketing companies and sponsoring advertisers. The letters sent out by the FTC noted that if a post includes “more” to indicate there is additional content available, the disclosure must be before or above that reference and that some disclosures weren’t clear even when made conspicuously. For example, “#sp” referring to ‘sponsored’ or “Thanks (name of product/service/brand)” or similar oblique references, especially when placed in a string of other symbols, abbreviations, links, hashtags (#), emoticons and emojis are not likely to be conspicuous or easily understood by many consumers.
Although the FTC did not publicly disclose the names of the recipients of the letters or the actual letters themselves, this is the first time the FTC has directly targeted social media influencers themselves, highlighting the requirements set out in the Guides that any “material connection” (e.g., paid sponsorship, contractual obligation, gifts, ownership interest, etc.) must be clearly and conspicuously disclosed unless the context already makes the connection clear.
Understanding the nuances of national and international advertising, marketing, promotions and sponsorships can be daunting. Implementing practical policies and practices to avoid problems before they arise, while meeting your marketing objectives, building brand recognition and strengthening your intellectual property assets is never simple or easy. The FTC’s jurisdiction includes everything from multicultural marketing, promotional campaigns involving user-generated content, sweepstakes and contests, as well as the privacy and data mining implications of marketing and promotional activities. Whether you are reviewing your current slate of endorsements, native advertising, product placement or branded entertainment, trying to enhance customer loyalty, affinity, co-branded marketing or reward programs, or if you are simply looking at new and innovative ways to use technology, including mobile and social media, to advertise, promote and market your brand, your products or your services – you need to understand the law and regulation that surround these activities.
As always, if you need or want to know more about the information or subject of these Legal Bytes, always feel free to contact me, Joe Rosenbaum, at Rimon Law!
The Paradox of Illumination
I first heard about the paradox of illumination from Lee Loevinger, an extraordinary gentleman I was privileged to know professionally. Lee was a multi-faceted, multi-talented, thought-provoking lawyer whose sage advice and stimulating ideas continue to resonate with those honored to have known him, and everyone else wise enough to read his work and the words he left behind.
In a nutshell, the paradox of illumination is extraordinarily complex, but simple to describe. Much like Albert Einstein who, when asked about his theory of relativity and the notion that time is not constant, described it in personal terms: if a man is at dinner for 10 minutes with a beautiful woman, it seems like a fleeting instant; but sit on a burning hot stove for 10 minutes and it seems like an eternity :).
The paradox of illumination can similarly be described on a personal level. Sit in completely dark room. Really. Completely dark. What can you see? Nothing. You know little about your surroundings and can only sense your own body – in fact, you don’t even know how far your surroundings extend beyond your immediate sensations.
Now light a match. The circle of illumination allows you to see a little of what is around you – but the perimeter and beyond are still dark. Now light a candle. The circle of what you can see illuminated by the light is larger than before, but the size of the perimeter beyond which you cannot see is also a lot larger than before. The larger the light, the larger the area of illumination, but larger by far is the perimeter beyond which we know nothing.
The more we can see and the more we know and understand about the world around us, the larger the amount becomes that we don’t know. In other words, as the circle of our knowledge grows, so does the amount of knowledge we cannot see and don’t know. The paradox of illumination is the paradox of knowledge. Perhaps that is why Michelangelo, when he was more than 87 years old, still said, “Ancora Imparo” (I am still learning).
Curiosity
Curiosity requires a sense of inquisitiveness.
Not all inquiries reflect curiosity, curiosity is inquisitive by nature.
Curiosity is the desire to learn by asking questions, dissecting, examining, exploring and investigating.
Curiosity is at the heart of most experimentation, and to be truly satisfying requires the ability to avoid preconceived ideas or foregone conclusions, but not necessarily ignoring them.
Stephen Hawking once said that “The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.”
Curiosity is a recognition of what we don’t know and the hope that by exploring the unknown, we may learn and discover new questions to ask.
It is the paradox of illumination – but more on that next time.
Thought Leadership
Thought leadership is a state of being in which one or more individuals articulate innovative ideas – ideas that stimulate thought and are futuristic or leading-edge.
Thought leadership requires confidence and a willingness to share ideas in the form of insights and principles that inform and guide future considerations.
Thought leadership is often controversial. New or different ideas, like innovative technology, can cause evolutionary change, but can also create disruptive or revolutionary change.
Although not all thought leadership must be actionable, it is often the basis for a re-evaluation of existing pathways, and a guidepost for new roads ahead.
2016 Metamorphosis *
Legal Bytes will soon morph** and undergo a transformation***
Watch For It
* Metamorphosis: A noticeable change in character, appearance, function or condition.
** Morph: To undergo dramatic change in a seamless and barely noticeable fashion.
*** Transformation: A marked change in appearance or character, especially for the better.