ICO — Unidentified Object or Security?

ICO — Unidentified Object or Security?

An Initial Coin Offering (“ICO”). Is it an unidentified (not flying) object or an offer of securities, like any other stock or interest you’d buy in a company?

Whether you are buying into or issuing an ICO of cryptocurrency, the question isn’t an academic one. Until recently, whether an ICO was considered an offer of “securities” within the meaning of federal law was relatively undecided. As a result, whether you were safe — or not — in trying to use various exemptions, such as private placements of securities under Regulation D, was up uncertain. That appears to have changed.

Recently, the federal government sought to indict defendant Maksim Zaslavskiy for securities fraud and conspiracy to commit securities fraud. Mr. Zaslavskiy’s argument in support of dismissing the government’s indictment was that the digital currencies involved weren’t “securities” akin to stocks or bonds. However, the United States District Court for the Eastern District of New York court found that a reasonable jury could find that his digital currencies satisfied the test of a “security” within applicable case law.

Whether this decision withstands scrutiny on appeal, if it is appealed, remains to be seen.

That being said, if you are operating in the cryptocurrency world, the best way to deal with an ICO is to comply with applicable federal (and state) exemptions to the otherwise cumbersome securities registration requirements.

In so doing, you can buy into or carry out an ICO without looking over your shoulder.

Google Privacy. Oxymoron?

Google Privacy. Oxymoron?

If you use Google, have you ever read their privacy policy? If you haven’t, please keep reading. The policy delineates under what circumstances Google can peruse your information, including your e-mails, for disclosure to third parties. While you may not think the policy will ever affect you, your e-mails and other messages on Google could be disclosed by the company under certain circumstances. What are they?

Generally, Google will not disclose your information to third parties without your consent and, in the case of sensitive personal information, without your “explicit consent.” The company’s privacy policy makes clear, however, that it may disclose your information to “affiliates and other trusted businesses or persons,” which is a pretty broad category. Google also makes another exception to “[m]eet any applicable law, regulation, legal process, or enforceable governmental request.” These categories could include, for example, a subpoena sent to Google from a plaintiff in a copyright infringement lawsuit or a court order.

Even when you receive a notice from Google that a subpoena seeks the disclosure of your information, or identity, you still have choices. The same is true of a court order. You can ask that Google “quash” the subpoena — which means that the subpoena is overly broad or seeks information irrelevant to the underlying lawsuit. In the case of a court order, it can be stayed pending an appeal. Needless to say, if you don’t care about your information being disclosed, you can do nothing. But if the subpoena seeks to unmask you so as to name you in a copyright infringement lawsuit, or otherwise, doing nothing may not be wise. A fair use other other defense may conclusively establish that the lawsuit is a sham.

Rather than using Google — or even social media outlets like Facebook — with your eyes closed, it is probably better to know what you are getting yourself into. Otherwise, you may be unpleasantly surprised one day when you find out what you thought was private isn’t.

FBI v. Apple – Round 2

FBI v. Apple – Round 2

How important is your iPhone privacy? Does it defeat law enforcement’s interest in obtaining evidence of child pornography productions from your iPhone? According to a recent New York Times article, Apple decided to plug a privacy hole in its iPhone through which law enforcement could crawl. This plug was in response to FBI’s previous end-run around iPhone software. You can read more about FBI v. Apple — Round 1 — here.

As the Times article makes clear, Indiana law enforcement officials used a $15,000.00 device from Gray Shift to unlock 96 iPhones in 2018, each time with a warrant. In Round 1, the magistrate judge essentially ordered Apple to create a back door through the iPhone’s encryption for the FBI to use. This overreaching doesn’t exist in Round 2. It doesn’t appear the Indiana warrants required Apple to create a back door. As with real property cases, law enforcement has a right to forcibly enter your property once they have a warrant.

But Apple’s plug now makes such devices likely obsolete. In so doing, Apple has made it harder for law enforcement to access your iPhone even when there is a warrant. Some district attorneys have argued, as pointed out in the article, that Apple is “blatantly protecting criminal activity.” Viewing Apple this way is black and white: either there is easy third party access and Apple is good or no third party access but then Apple is bad.

In so doing, a middle road is ignored. When law enforcement obtains a warrant to search your bitcoin that is stored in a Switzerland bunker, they will not be able to access it without help. The bunker is not linked to the internet. While the FBI could physically access the bunker, if necessary, the data on the blockchain is meaningless. All identities are protected by crypto hash signatures. One solution would be for the owner of the bunker — your bitcoin landlord — to obtain the information needed about your account and submit it to the judge for private (“in camera”) review. This solution was proposed in Round 1.

By giving evidence from an iPhone to the judiciary, Apple could proudly assist law enforcement’s prosecution of child pornography, among other things. At the same time, Apple could still keep plugging otherwise revenue loss causing privacy holes.

Artificial intelligence Art: Who Owns It?

Artificial intelligence Art: Who Owns It?

If your pet dog Hans takes a selfie, does he own the copyright? A recent decision by the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) is instructive. It says that a monkey can’t own the copyright to his selfie. The reason? Only humans can own a copyright under U.S. law. But who owns artificial intelligence (“AI”) created artwork? This entry addresses that issue.

The Ninth Circuit Decision

The Indonesian monkey at the heart of the dispute is named “Naruto.” He is actually quite handsome, as you can see if you look up his profile shot – not on Linked In, of course. The story began on the island of Sulawesi, not Fantasy Island but close. David Slater, a British wildlife photographer, left his camera unattended. Naruto then picked up the camera and, harnessing his training at the British Museum School of Art and Design, began taking stunning photos of himself.

Whilst Gentleman’s Quarterly and other magazines sought to feature him in their publications, Naruto couldn’t be bothered. His images, posted by Mr. Slater, had already gone viral. Naruto retained the services of People for the Ethical Treatment of Animals (“PETA”) to sue Mr. Slater and his publishers for copyright infringement. The Ninth Circuit dismissed the suit because Naruto can’t own the copyright to the photos.

Unfortunately, Naruto couldn’t be reached for comment.

Part of the reasoning of the court was simple. The U.S. Copyright office “will refuse to register a claim if it determines that a human being did not create the work.” The office further states that it will exclude works “produced by machine or mere mechanical process that operates randomly or automatically without any creative input or intervention from a human author.” The question raised by the decision is whether computer generated art is copyrightable and, if so, whether the AI – or its programmer – would be the owner.

AI Art & Blurred Lines

The issue of AI created artwork isn’t academic. According to one recent article in Art Net News, the Paris based collector Nicolas Laugero-Lasserre acquired Le Comte de Belamy, which was created by artificial intelligence. Mr. Laurgero-Lasserre bought the work directly from Obvious, a collective that created the AI behind Le Comte de Belamy. Instead of a signature, the artwork is signed by the AI using an equation. Naruto is jealous.

As AI gets smarter and more evolved, it will be capable of not only just creating art. Think of AI like that found in War Games (1984) which can create systems of engagement resembling  warfare. Then you extrapolate such a system to business. In such a case, a company like Obvious can create AI that spawns not only art but other companies, chock full of their own versions of Suri. This AI dominated world is laid out in movies like Her (2013), in which the main actor – Joaquin Phoenix – forms an intimate relationship with an AI app played by Scarlett Johansson. With the proliferation of synthetic body parts, imagining a full functioning AI cyborg that resembles a human isn’t as far-fetched as it may have sounded in the 1950s. The lines between fair use and copyright infringement have been blurred by mash-ups that modify music samples so that their identities become unrecognizable. Similarly, there will be blurred lines between human and AI created art as the years progress. The law needs to be ready to address these issues.

But, as the character Willie Stark explained in Robert Penn Warren’s All The Kings Men, “(the law) is like a single-bed blanket on a double bed and three folks in the bed and a cold night . . . There [not] ever enough blanket to cover the case, no matter how much pulling and hauling, and somebody is always going to catch pneumonia.” Maybe the shortcomings of the law in dealing with AI issues will always be here. But such shortcomings can be mitigated by policy makers who have foresight today as to where technology is heading tomorrow.

Public Domain Versus Work-For-Hire

If Naruto doesn’t own the copyright to the photo, then it would likely be in the public domain. However, an argument could be made that any art created by other animals who reside on government owned reserves or private property would be owned by the reserve or property owner. This is how a work-for-hire works in the U.S. While the author normally is the proper copyright owner, a work-for-hire arrangement gives the employer of the author the right. A similar approach could be taken by those who provide room and board to the likes of Naruto the handsome.

The issue remains about whether AI created art is also not subject to copyright because it was “produced by machine or mere mechanical process that operates randomly or automatically without any creative input or intervention from a human author.” Using the reasoning of the Ninth Circuit, the answer would be that all such works are in the public domain. But then the question becomes whether one could make copies of Comte de Belamy in the U.S.  without worrying about a copyright infringement lawsuit. While several nations, such as the U.K., grant copyrights to a person who arranges for the creation of computer generated works, the U.S. does not.

Either the U.S. takes the U.K.’s lead or these works will end up in the public domain. This overly rigid approach as to what constitutes “intervention from a human author” would result in counterintuitive outcomes for companies like Obvious. By allowing owners of AI to own the creative works spawned by their systems, U.S. law could also conceivably give copyright rights to those who own the property on which the likes of Naruto the handsome reside.

Facebook: “Ad brokers are watching.”

Facebook: “Ad brokers are watching.”

Use Facebook?

If you do, then you’ll likely know about the recent controversy surrounding Cambridge Analytics. But didn’t Facebook know what Cambridge was doing? And didn’t Facebook knowingly directly share user data with prior political campaigns and other third party ad brokers?

Even if you don’t use Facebook, being aware of the privacy pitfalls that exist in the marketplace for your friends and family is most valuable.

To find out more, please watch this brief interview of me by Fox Business.

Please click HERE.

Blockchain — Not A New Cartier Pearl Necklace.

Blockchain — Not A New Cartier Pearl Necklace.

They say diamonds are a woman’s best friend. They also say a dog is a man’s best friend. But perhaps they are wrong?

Unless you have been living under a rock somewhere, which may not be such a bad idea, you’ve probably heard a great deal about “blockchain.” The thing is, most if not all of the explanations out there about blockchain involve complicated flow charts and confusing technological gibberish.

Want a common sense explanation that you could see at a Little Red School house in the Midwest? Click HERE for my interview by the Nordic Blockchain Association, where I use poetry — yes, that dirty five letter word — to explain the ins and outs of blockchain.