Is Bitcoin money? US Courts Say Yes.

Is Bitcoin money? US Courts Say Yes.

As the popularity of digital currency Bitcoin increases, the United States will need to take a stance on how they will regulate the currency through different sectors of the economy. The media and the general public may think lawmakers will decided the US stance on Bitcoin, but our court system may be the one that decides the future of digital currency in this country. There have been a couple of cases in the past few years where the court system seems to be taking a position on Bitcoin. Although bitcoin may not be considered money in the traditional sense, many of the court cases have viewed Bitcoin as a currency. In fact, bitcoin  has also been compared to international currencies like the Euro or Yuan. The cases provided below may be providing hints of where the future of Bitcoin may be going in America.

SEC v. Trendon Shavers

In September 2014, Trendon Shavers was fined $40 million for defrauding investors into a Bitcoin Ponzi scheme. Shavers was the operator of Bitcoin Savings and Trust and was known to have solicited illicit investments in bitcoin-related opportunities. He accumulated about $64 million with his activities. The SEC brought the case against him and the court charged him by saying that bitcoin is a form of money  and therefore he could not defraud people with it. The court’s ruling was going against a 2013 declaration by the FinCEN guidance, which said Bitcoin could not be considered a currency. However, the Texas Court said it was pretty clear that Bitcoin can be used as a form of money and can help a consumer purchase goods and services. This case was also crucial because Judge Amos Mazzant provided insight on how bitcoin-denominated damages would be considered. In this case, Judge Mazzant looked at the average daily price of bitcoin to determine the amount of damages. This may set a precedent for similar cases in the future.

US v. Faiella

Charlie Shrem and Robert Faiella came under fire when the two were accused of providing bitcoin to Silk Road users, an online black market. Shrem was the CEO of BitInstant, a bitcoin exchange company. Both Shrem and Faiella were charged with several counts of money laundering and transferring money without a license. Faiella tried to plead his case by saying that Bitcoin was a digital currency and therefore did not fall under the money laundering counts. Judge Jed Rakoff rejected this reasoning and said something very similar to Judge Mazzant, explaining that anything that bought goods and services counted as money. Since bitcoin had the capability of purchasing goods and services and paying for things like a rental payment, it could be considered money. With this reasoning, both Shrem and Faiella were forced to plead guilty to the charges and ultimately ended up paying nearly $1 million in fines.

State of Florida v. Espinoza

Pascal Reid and Michell Abner Espinoza were arrested in February 2014 for engaging in fake transactions on LocalBitcoins.com and converting $30,000 of cash into bitcoin. Both were charged with Florida’s anti-money laundering law and with money transmission charges. In August, the Bitcoin foundation filed an amicus brief to dismiss the money transmission charges because Florida’s law applied only to corporations and entities qualified to do business in the state. Reid and Espinoza did not fall under this category. Although the foundation’s brief may help Reid’s case, that was not the goal of the organization. Their amicus brief was only an attempt to ensure an outcome that sets a favorable precedent for the rest of the Bitcoin community. Reid and Espinoza turned to the IRS to help them prove that bitcoin is not money.

US vs Ross William Ulbricht

This last case was fairly similar to the three presented above, where Ulbricht argued that he could not be charged with money laundering because bitcoin did not count as money. Ulbricht was charged with being the leader of the online black market Silk Road. He was found guilty on charges of computer hacking, drug trafficking, money laundering and engaging in a criminal enterprise. Like previous judges, Judge Katherine Forrest compared bitcoin to the Euro and other international currencies. While Ulbricht was not willing to plead guilty on any of his charges, there seems to be little hope that a decision will be made in his favor.

As it is clear through the four court cases present above, the legal definition of money is somewhat debated. US Courts seems to agree that bitcoin does fall under the category of money, but defendants continue challenging this definition of money. Their explanation for this is that bitcoin, like money, can help someone pay for goods or services. Many foreign countries have criticized the use of bitcoin and want to ban the currency all together. A case involving Bitcoin has not yet reached the Supreme Court, but their decision may put an end to all this debate.

Source referenced: Coin Desk

What are Blockchain Smart Contracts?

What are Blockchain Smart Contracts?

Smart contracts are “contracts between parties stored on a blockchain” or “any computation that takes place on a blockchain.” The term can be used to identify a specific technology (smart contract code) or a specific application of that technology (smart legal contracts). The two uses of this term often lead to confusion and debates among individuals. Understanding the difference between the two uses of the word smart contracts will help you answer questions and better take a stand for your position on smart contracts.

Smart Contract Code

Smart Contract Code is the term used to identify a specific technology. Individuals who develop blockchain technology used the term “smart contract code” to refer to blockchain code. However, many people generically use this term to refer to any complex program that is stored and executed on blockchain. The reason we call these codes contracts is to show that they hold something valuable. Think of it as something equivalent to money or someone’s identity. Unlike legal contracts, smart contracts are not actually “contracts.” They do need conditioned financial language at all times.They can also hold balances of cryptocurrency. Augur, Slock.it, and Boardroom are examples of application that are made out of smart contract code. As the use and understanding of this term increases, we may be able to get out of using the analogy to legal contracts. Instead, we may be able to refer to smart codes the same way we refer to JavaScript or HTML.

Smart Legal Contracts

The terms smart legal contracts refers to “a way of using blockchain technology to complement, or replace, existing legal contracts.” Unlike Smart Contract Code that can operate on its own, smart legal contracts need the assistance of the law. In other words, it would require a blend of code and natural language. An example would be a supplier of goods who enters into a contract with a retailer. While the payment may be automatically made when the delivery is made, an indemnification clause would no bring any value to a smart legal contract because a court would be needed to enforce it.

When can you use a Smart Contract?

There are many different uses for smart contract. In the past, they have been used by the financial field as instruments for stocks, bonds, or derivative contracts. This allowed them to simplify the process related to trading. In the future, real estate and intellectual property can be exchanged and traded over the blockchain system. The hope is that smart contracts can be used to facilitate new types of commercial arrangements and make more commercial relationships possible. Machine-to-machine commerce and the growing system of smart devices with the ability to communicate to one another is also a region for smart contracts to grow. While smart contracts will not necessarily work for legal contracts, they are commercially viable if there is a trusting relationship.

We hope this article has cleared up confusion on the term smart contracts and has provided information on when to use smart contracts. The different uses of the term in the field only adds to the confusion of blockchain technology and smart contracts. With more and more technologies emerging, we should see an increase in the use of smart contracts for commercial purposes. Using them for legal matters is not recommended for the reasons stated above. Lawyers looking at smart contracts often see them as marginally approved legal agreements, but fail to see the potential of blockchain-code to extend beyond law’s reach.

Source referenced: Coin Desk

Is it Time to Revise your Employee Handbook?

Is it Time to Revise your Employee Handbook?

We recently blogged about the importance of having an employee handbook. Not only is the handbook a way for employers to protect themselves against lawsuits, it is also a way for them to showcase themselves to potential employees. Richard F. Griffin, Jr., General Counsel of the National Labor Relations Board (NLRB), issued a report on common employee handbook provisions. In the previous blog post, we suggested writing a custom employee handbook, but taking suggesting from the NLRB is definitely recommended for all of our business client.

This report specifically restricted employers from issuing policies or rules that “inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.” Many employers have confidentiality policies that may be well-intentioned, but can be seen by the NLRB as over-intrusive and illegal. Although the NLRB report was lengthy and detailed, there were some clear “DON’Ts” that emerged from the documents:

  • Do not prohibit employees from discussing “employee information.”
  • Do not prohibit disclosure of “another’s confidential information.”
  • Do not prohibit disclosure of “details about the employer.”
  • DO not prohibit disclosure of all categories of “non-public information.”

Some of the things listed above may not specifically prohibit employees from taking collective action or freely expressing themselves, but the NLRB is concerned about anything that may dissuade an employee from acting. However, the NLRB is also aware of the rights of employers and how most employers are concerned about doing their best to protect their businesses. Due to this, there are confidentiality provisions that the NLRB has deemed legal:

  • No unauthorized disclosure of “business ‘secrets’ or other confidential information.”
  • “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [the Employer] is cause for disciplinary action, including termination.”
  • “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.”

One of the most important takeaways from the NLRB’s report is that employers have to be careful in what they imply with their words. There are some rules that are nested among others and may be seen as unnecessary or too prohibitive by an employee. However, the NLRB also understands an employer’s position. Therefore, an employers best bet is to steer clear of vague instructions in an employee handbook. We would recommend our business clients to stay up-to-date with the NLRB and update their employee handbooks accordingly.

Source referenced: Labor Sphere

 

Think Twice Before Flying Your Drone

Think Twice Before Flying Your Drone

The State of California has always been very concerned about its citizens privacy and has done its best to protect it. In the 21st century, the biggest threat to someone’s privacy is a camera drone. California is tackling this problem with Assembly Bill No. 2306. This law makes it both illegal and costly for anybody seeking to invade someone else’s privacy by taking photos of them with a camera drone. Many people say this law applies to paparazzi, but this is not entirely true. Drone sales have been increasing and many people buy drones for personal use. This can lead to concerns over where they  can legally fly their drone in certain areas. As a rule of thumb, a drone should not fly anywhere someone would have a reasonable expectation of privacy. An example would be your neighbor’s backyard.

The bill is an attempt to “expand a person’s potential liability for constructive invasion of privacy  by removing the limitation that the person use a visual or auditory enhancing device, and would instead make the person liable when using any device…to engage in illegal activity.” California lawmakers felt that existing laws on invasion of privacy did not cover drones and adding Assembly  Bill No. 2306 would better protect people’s privacy. The full act can be read at the link specified below.

Past laws on privacy said that a person was liable

"for 'constructive invasion of privacy' for attempting to capture, in a 
manner highly offensive to a reasonable person, any type of visual image, 
sound recording, or other physical impression of another person engaging 
in a personal or familial activity under circumstances in which the  
plaintiff had a reasonable expectation of privacy, through the use of a 
visual or auditory enhancing device."

Assembly Bill No. 2306 removes the statutory tort of “constructive invasion of privacy,” which required that device used to invade someone’s privacy either enhance the video or audio. Removing this part of the bill allows drones to fit the requirement.

The civil punishments for this act are very expensive and should serve as a deterrent for possible criminals. The act says any “person who comes within the description of this subdivision is also subject to a civil fine of not less than five thousand dollars ($5,000) and not more than fifty thousand dollars ($50,000).” In addition, anyone in violation of this law would be liable for up to three times the amount of any general, special damages, or punitive damages. In the case of paparazzi or anyone else invading someone’s privacy for commercial gain, all profits from the invasion will be given to the victim.

Although drones are available to buy in many big box stores and on several online sites, we recommend everyone to be careful when flying their drones. Many experts recommend flying drones in rural areas and far from residential areas. The fines and penalties for violating this law are very expensive, so we highly encourage everyone to strongly consider the purpose behind flying their drone and taking all necessary precautions.

Source referenced:

  1. PetaPixel
  2. Assembly Bill No. 2306
  3. Assembly Bill No. 2306 Analysis

 

 

Why You Should Stop Carrying Cash

Why You Should Stop Carrying Cash

What is Venmo?

If you have ever visited a restaurant or bar with your friends and got stuck with paying the entire bill or tab, you know the struggle of asking them to pay you back. Asking your friends to reimburse you can be a never-ending struggle, but not anymore. Enter Venmo, a mobile app you can connect to your bank account and social media accounts to exchange money. The app allows users to have a digital wallet connected to the money in their bank account. Using Venmo does not cost anything, unless you decide to use a credit card. If you use a credit card, you are required to cover the 3% transaction fee. The app, used mostly by millennials, eliminates the need to use an ATM or wait around for checks to be deposited. While some youngsters were hesitant to start using the app because it seemed “sketchy,” they regularly use the app now.

Venmo as a Social Media

Not only does Venmo serve as a digital wallet, it doubles as a social network. Every time a user makes a payment to a friend, they can summarize what the reimbursement was for and post it on Facebook, Twitter, or any other social media sites. This allows Venmo to be more communicable for its users. Many users say they enjoy seeing what’s going on with their friends. One user said, “I wouldn’t scroll through Venmo just for kicks. But when I’m there, making a charge or a pay request, I like to check out what’s going on. People are kind of entertaining. Everyone wants to be creative and sarcastic. It can be pretty funny.” More and more people across America are turning to Venmo to settle their payments. While Venmo did not want to disclose the number of users they had, they did say that the company processed $700 million in payment in the third quarter of 2014. This number is only expected to rise as more people are asking their friends to “Venmo them” instead of paying them in cash.

venmo-app

The History of Venmo

Venmo was founded by two friends, Andrew Kortina and Iqram Magdon-Ismail, both graduates of the University of Pennsylvania. After college, both friends worked at startup companies, but knew they eventually wanted to start their own business. Venmo was born when Magdon-Ismail went to New York to visit Kortina and forgot his wallet. By the end of the trip, Magdon-Ismail owed Kortina $200. Both friends knew there had to be a better way for Magon-Ismail to pay Kortina back without the hassle of depositing checks. This is when Venmo was born. In the early stages of Venmo, users were able to use text messaging to send payments and write a short message. However, the founders knew they wanted to switch to a mobile app. The startup raised over $5 million in its first years and was successful until it had its first major crisis. Many of Venmo’s early users were using their credit cards to make payments and Venmo was covering the 3% transaction fee. This was costing the company too much money and profit. When Venmo made users pay the fee, their sales plummeted. With cashing running low, the founders decided to go to Braintree for help. Braintree ended up acquiring Venmo for $26.2 million. Venmo now makes money by charging merchants, who pay a fee every time a Venmo user complete a purchase order.

The Rise of Mobile Payments

Many futurists have been predicting the end of cash, credit cards, and checkbooks. A 2013 study predicted that Americans would use mobile payments to spend about $90 billion in 2017. Due to Venmo and the rise of mobile payment, this number has increased to $12.8 billion. Mobile payments are becoming the mainstream and merchants are attempting to get in on the action. There are more than 1,400 digital-payments-related startups. Apple Pay, Android Pay, and Snapcash are just a few examples. Venmo believes their app is a great way to get consumers comfortable with using their phones to make payments. The future of mobile payments seems to be very bright.

Source referenced: Bloomberg Businessweek

Trade Names vs. Trademarks vs. Domain Names

Trade Names vs. Trademarks vs. Domain Names

When we speak informally, we tend to think a company’s legal name, the name under which it is registered with the government, and the domain name it uses to communicate online are the same thing. Legally, this is not true. There is a difference between trade names, trademarks, and domain names. Knowing the difference between these three and knowing about the three different worlds they operate in can make all the difference for your business.

Trade Names

Under our legal system, a business is treated as a separate entity. A business is essentially considered a person. Each business is registered both with a state government and the IRS. A trade name is the name a business uses on contracts and other legal documents. This is also the name you would search for on Google or Yahoo if you are looking to get more information on a business.

Trademarks

A trademark can be the same as a company’s trade name, but it does not need to be the same. Sometimes a company uses different trade names and trademarks because they think one of them is easier for the customer to use and remember. Trademarks can be seen as the company’s “official” title. Let’s take Amazon for an example. Everyone knows Amazon.com as an online retailer, but may not know that the online retailer also operates under different legal entities. For example, they have Amazon.com Baby Inc., Amazon Payment Inc., and Amazon Overseas Holdings, Inc. A trademark would ideally be registered with the US Patent and Trademark Office and at the national trademark offices of  every countries where you do business.

Domain Names

Domain names are the internet protocol addresses associated with your website. For example, insidecounsel.com converts to 184.73.162.106 and domain names are managed by private companies. However, owning a certain domain name does not give you any trademark rights. While trademarks are only registered for specific goods and services, domain names are not. Any person in the world can own any domain name, regardless of if they are selling a service or product. Due to this, Delta Airlines had a lot of trouble obtaining delta.com as their domain name. If you are selling a good or service and you know someone has taken your domain name in bad faith (to divert customers from your business or to resell the domain to make a profit), having trademark rights over the name may help your case.

We hope knowing the difference between trade names, trademarks, and domain names has been helpful to our business clients. Thoroughly understanding the difference between these three can help your business avoid mistake and will help you properly protect your intellectual property rights.

Does GPS Tracking Count as a Search? Yes.

Does GPS Tracking Count as a Search? Yes.

Law enforcement agencies have become more aware of how technological advances can help them monitor and track suspects and criminals. The Supreme Court, however, has put a limit on what exactly counts as a “search” and how far authorities can go in tracking repeat offenders. Torrey Dale Grady, a repeat sex offender, was told he must wear a GPS ankle bracelet 24 hours a day so that he can be monitored by the North Carolina police. Grady said that since the device needed to be charged, he was required to sit next to a wall outlet for at least 4 to 6 hours per day. Grady unsuccessfully battled the ankle bracelet in North Carolina courts, but eventually made his way to the US Supreme Court. Grady claimed that the GPS ankle bracelet would be the equivalent of an unreasonable search and seizure, therefore violating his 4th Amendment rights. The Supreme Court was  interested in answering this question for once and for all.

In a unanimous decision, the Supreme Court agreed with Grady and said that if the government attaches anything to your body or your property, it counts as a search. Although the North Carolina Supreme Court had sided with its police authorities and said the ankle bracelet was perfectly legal, the Supreme Court sent the case back to the state’s highest court to be heard once again. Siding with Grady, the Supreme Court also mentioned precedents. One of the cited cases was US v. Jones, in which the Supreme Court had ruled that installing GPS devices in a suspect’s vehicle fell under the 4th Amendment search.

The Fourth Amendment and advances in technology seem to be in contradiction. It is expected that the Supreme Court will soon have to deal with the issue of whether geolocations from our phones are also protected under the Fourth Amendment. We will have to wait and see when such a case makes its way to the nation’s highest court. The concern about technology and surveillance is growing as more and more Americans purchase smartphones. This ruling will force lower courts to consider whether attaching a GPS tracker to someone is a violation of their constitutional rights. North Carolina was not alone in requiring repeat sex offenders to wear ankle bracelet. Wisconsin did the same thing, but both of these states and others will now be forced to reconsider their method of monitoring criminals.

 

Source referenced:

  1. Naked Security
  2. The Atlantic