News

Federal Trade Commission Spring Seminars on Emerging Consumer Privacy Issues

This spring, the Federal Trade Commission (FTC) is hosting a series of seminars examining the privacy implications of three new areas of technology that offer potential benefits as well as possible privacy concerns for consumers. Tools geared toward these three areas, mobile device tracking, alternative scoring products and consumer-generated and controlled health data, have become increasingly popular with businesses and as products for technology companies to invent and sell. Businesses see opportunities to increase efficiency and effectiveness in meeting consumers demands with the aid of these tools allowing them to track and analyze potential customers.Consumers, however, are becoming increasingly concerned about the lack of transparency that surrounds these efforts to collect and analyze personal data. The series is intended to bring together stakeholders on both sides to discuss the implications of each new area. Academic, business and industry representatives, and consumer advocates will participate in these two-hour discussion sessions, which will be held in Washington, D.C. and are open to the public. The FTC is inviting public comments and will issue staff reports after the sessions.

Mobile Device Tracking (February 19th)
The seminar on mobile device tracking was held Wednesday, February 19th at the FTC Conference Center in Washington D.C. Speakers discussed the tracking of consumers’ movements throughout and around retail stores and other attractions by retailers and other businesses. There are several technologies for this process and while they may differ, generally the tracking is invisible to consumers and occurs with no interaction. The seminar looked to answer some of the questions associated with these technologies and address consumer and business concerns in this area.

An archived webcast, list of speakers and rough transcript are available here.

Alternative Scoring Products (March 19th)

In efforts to minimize risk or maximize return on investment, many data brokers combine consumer data with specific algorithms or mining techniques to produce predictive scores based on trends and behaviors of customers. These predictive scores can be used for a wide range of purposes, from identity verification and fraud prevention to marketing and advertising. Consumers have little to no access to the underlying data that comprises these scores and are largely unaware of this behind the scenes process. The March 19, 2014 seminar on alternative scoring products will discuss the various questions and concerns that surround the production of these predictive scores.

Consumer Generated and Controlled Health Data (May 7th)

The abundance of information available online and the new computing capabilities and portability of smart devices has allowed consumers to become more active in managing and generating their own health data. The information consumers collect from connecting health and fitness devices can be transmitted to other entities. While the abundance of personal health information may be beneficial for consumers, this data is outside the traditional medical provider context where much of the privacy legislation, like HIPAA, is geared. The May 7, 2014 seminar on consumer generated and controlled health data will raise these examine these potential privacy concerns as well as the benefits provided.

For more information on any of the seminars or to leave public comments visit the Spring Privacy Series webpage.

Careers in the Area of Technology Commercialization

Technology commercialization is a unique interdisciplinary field with many potential career opportunities. A major misconception is that attorneys trained in this field can only pursue careers in intellectual property law, specifically patent law at law firms or as in-house counsel to private companies. Although many attorneys do choose this traditional route, there is an array of non-traditional career options.

Working for the government is one option. Traditional careers might be in the U.S. Patent and Trademark Office or the Copyright Office. However, attorneys have found careers in other departments as well, such as: the Federal Trade Commission, the Securities and Exchange Commission, the Department of Commerce, military departments, and the Department of Health and Human Services, specifically National Institutes of Health. Many state governments also seek applicants with knowledge of technology and commercialization law. New York offers careers in its Division of Science, Technology and Innovation as well as in the Office of Information Technology Services. Similarly, California has a Department of Technology that offers careers in its Information Technology and Statewide Technology Procurement divisions.

A second area for non-traditional employment that is growing in popularity is at consulting firms. Consulting firms traditionally looked for M.B.A. candidates, but have recently been considering J.D. and J.D./M.B.A. candidates. With a background in technology and commercialization law, attorneys can provide a technology analysis, intellectual property landscape, regulatory guidance, a competitive landscape, market analysis, and recommendations. These are all skills developed during the study of technology and commercialization law and they map well onto a career in consulting.

Finally, university technology transfer offices require many of the skills that attorneys in the field of technology commercialization have acquired. Technology transfer offices conduct technology assessments and research businesses that might want to purchase or license technologies made by university faculty, researchers, students, and staff. Employees not only negotiate intellectual property licenses, but often interact with inventors in order to secure intellectual property protection. Attorneys at technology transfer offices also conduct patent searches and guide inventors through the patenting process with outside counsel. In addition, attorneys in these offices help businesses that license technologies from university with commercialization grant applications. These are just a few of non-traditional careers for attorneys trained in technology and commercialization law.

Binghamton University Innovation Day: Big Data

The Office of Entrepreneurship and Innovation Partnerships, in conjunction with the Center of Excellence in Small Scale Systems Integration and Packaging at Binghamton University will be hosting the annual Innovation Day event on April 24, 2014. This year’s topic is “Big Data”.As new sources of data become more available, more businesses, both large and small, and government agencies are embracing the possibilities of analyzing the unprecedented volume of data for improved efficiency and effectiveness of products and services. Innovation Day 2014 – Big Data, Making Sense of our World, will host discussions and creative and critical thinking about what this process means for consumers, businesses and government. Subject matter experts will facilitate the exploration that includes panels, a student poster session, a hackathon and facility tours of media labs and the data center.

These experts include Katharine Frase, Vice President and CTO, Global Public Sector at IBM; Scott Zeger, Vice Provost for Research at Johns Hopkins University; and Hao Wang, Chief Information Officer and Vice President for Information Services for the Research Foundation for the State University of New York. Panel discussions will include the variety of application areas such as human resources, advertising and marketing, medical treatments and public health programs, bank loans, asset pricing and more.

Registration will be opening soon.

Buffalo Niagara Advance Manufacturing Institute is Announced

Governor Andrew Cuomo announced the launch of a new state-of-the-art facility in Western New York aimed at supporting manufacturing sector growth and economic development opportunities in the region. Another component of the Buffalo Billion initiative, the Advanced Manufacturing Institute will provide applied engineering services and support to help local industry develop more efficient and competitive operational processes.


The Institute will be operated by non-profit engineering services R&D company, EWI, and founding members include Praxair, Sherex Fastening Solutions, The InVentures Group, and Jiffy-tite Company. The Institute includes technology focus areas which are: Flexible Automation and Controls, Advanced Materials and Testing, Additive Manufacturing, and Advanced Fabrication. Industry demand for technology services in each area will drive the building phases of the Institute’s technical capabilities. Particular emphasis is being placed on new product and process development in the region’s growth sectors which include advanced manufacturing, machinery, food processing, chemicals, medical devices and pharmaceuticals.

The Advanced Manufacturing Institute is one of the signature initiatives of the Buffalo Billion investment development plan. An $8 million Buffalo Billion grant from Empire State Development (ESD) allowed the Buffalo Niagara Medical Campus (BNMC) to purchase the building, located at 847 Main Street in Buffalo, which will house the. BNMC will provide space to house EWI for their start-up operations at no cost per the agreement and New York State will invest $45 million of the Buffalo Billion toward machinery, equipment, future facility needs and operations.

The Institute will establish its final name prior to the start of operations later this year.

Welcome

January marks the return of the law students, and for the 3L’s this semester represents the final push before the bar exam and the real world. Emphasizing real experience from lab to market has been the goal of the Technology Commercialization Law Program for many years, and partners beautifully with the START-UP NY goals. The semester is well-underway with patent &/or market landscapes, and legal and regulatory analyses being conducted for real companies, individuals and researchers. 

The law students in the TCLP put together some amazing research that provides early stage technology champions some much needed insight into that which they “know they don’t yet know”. It is a “win-win” for students and clients that semester after semester, doesn’t get old. 

This month’s issue brings you some interesting articles on some of the issues that have been occupying the TCLP talent this month. 

Launch NY

Launch NY is a Venture Development Organization. A business-driven, nonprofit that promotes regional growth by providing a flexible portfolio of services, including: assisting in the creation of high-growth companies; providing expert business assistance to those companies; facilitating or making direct financial investments; and, speeding the commercialization of technology.Launch NY, established in 2011, began with the preparation of a Regional Economic Action Plan (REAP), a project funded in 2010 by an Economic Development Administration grant to the Erie County Industrial Development Agency, and focused on JumpStart’s nationally recognized model for accelerating the success of diverse entrepreneurs, their high growth companies and the ecosystems supporting them. 

The demographic profile of Upstate New York aligns well with the overall profile of JumpStart in Northeast Ohio, and offers some potential advantages when comparing the education of the workforce and the amount of research spending at the colleges and universities across the region. While we have a large amount of university research, a legacy of innovation, and a well-educated workforce, there exists a lack of sufficient entrepreneurial talent, related expertise, and investment capital to take advantage of these strengths. The region lacks enough well-established sources of venture capital and has been unable to consistently attract capital from private investors located outside the region. Currently, the region produces a sizeable number of new high potential startup opportunities but only some of these qualify for professional investment. The region has the potential to increase this number substantially, but deal flow is perceived to be suppressed by a shortage of entrepreneurial assistance, experienced management leadership, and investment capital. 

Launch NY provides support for the 27 counties of Upstate New York with 4 Regional Entrepreneurs in Residence (EIR) based in Buffalo, Rochester, Syracuse and Ithaca. In recent months Launch NY has engaged in extensive networking activities to support the Upstate NY entrepreneurial ecosystem at 22 separate events, six were provided various levels of sponsorships. These events were attended by 1,391 entrepreneurs, 293 investors, and 1,571 resource providers, over 3,200 attendees total. Since January 2013, Launch NY EIR’s have provided 2240 hours of direct support to 126 regional start ups, with 338 employees, and assisted 20 of these companies secure over $8.7M of investments.

Flexible Low Yield Paper for Financing Social Enterprises

This review is drawn from a 2013 article entitled “Hunting Stag with FLY Paper: A Hybrid Financial Instrument for Social Enterprise” by Professors Dana Brakman Reiser and Steven A. Dean of Brooklyn Law School, published in the Boston College Law Review volume 54 issue 4, pages 1495-1544.

When a socially-minded entrepreneur has traditionally raised capital they are faced with two concerns. First and foremost, there is the concern of legitimizing the venture. If the entrepreneur forms as a charitable organization, they are ensuring the social goal of the venture as a legacy but will not attract profit-minded investors. Conversely, if the entrepreneur organizes as a for-profit entity, they run into the second concern: investors may not share their same passion for the social cause that is the heart of the venture. The for-profit status may ultimately frustrate the venture’s ability to “do good”; as majority shareholders, the investors can jettison the social cause in favor of a more robust bottom line. For-profit formation could ruin the entrepreneur’s hopes for the venture’s socially conscious legacy. Further, the case law is replete with reminders that the purpose of for-profit entities is to promote their value for the benefit of the shareholders.

There have recently been several attempts to bridge the gap between a for-profit organizational structure and the benefits of a non-profit’s social mission protection. The Low-profit Limited Liability Company (L3C) came out of Vermont’s legislature in 2008. The L3C is essentially an LLC with the contractual framework tweaked to allow for a social mission in addition to member profits. As long as the for-profit business has a social mission, it will remain an L3C. The instant the statutory requirements are no longer met, the L3C automatically converts back to an LLC, affording minimal protection to the underlying social mission. In 2010, Maryland adopted legislation allowing for the formation of benefit corporations. The benefit corporation is based on the traditional framework but is required to define the corporation’s public benefit and is held accountable to third party standards. While the monitoring is aimed at ensuring the social mission of the benefit corporation is met, there is no guidance explicitly announced regarding the third party’s standards. Further, the benefit corporation is allowed to select its third party standards, making the monitoring an entirely self-serving process. While L3Cs have no protection to ensure a social mission, benefit corporations need a proposal from the board and a supermajority vote by shareholders. Lastly, there is the flexible purpose corporation (FPC). FPCs arose under 2012 California legislation that, like benefit corporations, relies on a standard corporation framework. Unlike benefit corporations, FPCs have no third party monitoring of their adherence to their stated social mission; the social mission is selected from a statutorily defined list and incorporated into the FPC’s charter. To revoke an FPC’s social mission, a two-thirds vote of the shareholders must be obtained. 

The recent attempts at protecting a social entrepreneur’s legacy, the L3C, benefit corporation, and FPC, all focus on the organization’s form. Further, none of the for-profit options can guarantee the legacy of the social mission. Brakman Reiser and Dean propose shielding the financial instrument creating the relationship between the investor and entrepreneur rather than protecting the organizational form itself. Instead of relying on legislation for the solution, Flexible Low Yield (FLY) paper gives investors debt with specific terms attached to it rather than equity through the form of a hybrid financial instrument. Similar hybrid financial instruments, such as convertible bonds, have previously been used for funding efforts tailored to meet the needs of both investors and entrepreneurs/issuers. Social entrepreneurs can use FLY paper tailored to serve their specific goal of preserving their social enterprise’s legacy. In so doing, it ties the investors to the ultimate success or failure of the underlying social cause. In turn, investor protection is afforded through giving them the power to convert their debt into equity on favorable terms should the entrepreneur attempt to cash out their own shares. If the entrepreneur sold their shares, the investor would have an equity stake in the venture and could focus solely on maximizing return. This allays an investor’s concerns that the entrepreneur is going to take the investor’s money and run; the investors would be able to cash out as well. As an added protection, the investor would hold a note senior to common stock but junior to traditional debt. With the investors acting essentially as lenders committed to the goal of the company, the entrepreneurs are free to pursue the goals of the social enterprise. As such, FLY paper guarantees protection of the social mission- so long as the entrepreneur holds his stock they have full control of their venture. 

Another advantage of FLY paper is that it can be issued by any organizational form that can borrow money; it is not nearly as restrictive as the legislative solutions that offer protection through choice of entity. The certainty of repayment that comes with FLY paper would likely mean treatment as debt for tax purposes. As such, the enterprise could count the future interest as a deduction before it is paid. The benefit to the investor is that due to its low yield, FLY paper would incur relatively low taxes, or none at all if the investor had tax exempt status. The tax drawback is that if the venture is too early stage, the note exchange would not likely count as a loan but would more likely be seen as a purely equity investment. 

A final benefit of FLY paper over alternatives is the low return rate and fixed terms buffer the potential risk associated with investing in an early stage social enterprise. The investor is afforded a modest return in addition to repayment of the initial investment. With both sides showing a strong commitment to the social mission, it is easier to focus on maximizing shareholder wealth, a secondary consideration which is still important for both the entrepreneur and investor. If both parties remain steadfast in their obligation to both the social mission of the venture and realizing profit, both can advance their financial and social missions without much sacrifice. 

The entire article is available here.

Options for Protecting Software IP

As with other types of inventions, protecting software intellectual property is an important business consideration. Traditionally, intellectual property protection for software has been acquired through copyright protection, patent protection, or a combination of the two. Each strategy has its own benefits and drawbacks.

Patent protection is the intellectual property protection coveted by most inventors and has been gaining popularity amongst software developers because it provides the right to exclude others from making, using, selling, offering to sell, and importing the invention. Patent laws also protect against reverse engineering and independent creation.

These added protections come at a price; inventions are subject to a much higher level of scrutiny before a patent is granted. Patent eligibility requires that inventions must be new (novel), useful, nonobvious, of eligible subject matter, and properly disclosed. To qualify as eligible subject matter, software patents have often been categorized as process patents, machine patents, or both. An advantage to patent protection is that its exclusive rights are effective from issuance of the patent until the date twenty years from the filing date.

A disadvantage to patent protection is that it can be extremely costly. The average cost of obtaining a U.S. patent is roughly $15,000-$25,000, due mostly to attorney’s fees. Another disadvantage is that a patent provides only the “right to exclude others” and does not afford the inventor the right to make, use, or sell his or her own invention. For example, if Tom patents a software improvement that uses a method patented by Joe, Tom would need to obtain a license from Joe before he makes, uses, or sells his own patented invention. If there is a “patent minefield,” numerous patents similar to what the inventor wants to patent, the cost of obtaining the patent, licensing, and cross-licensing could be more expensive than the profits from a very limited patent.

More and more software programmers are finding patents to be the protection of choice, but this might be changing soon.The Supreme Court recently announced that it will review Alice Corporation Pty. Ltd. v. CLS Bank International (read more here), directly addressing patentability of software. Although the Court could issue a narrow ruling limited to the facts of case, it could also take the chance to set bright right rules, and at the vary least, provide some structured guidance for handling software patent cases.

Copyright protection grants the software developer the exclusive right to reproduce, adapt, publicly distribute, perform, and display the work. Registration usually costs $35 or $65 depending on the method of registration, whether it be online or by mail. Aside from cost, advantages of copyright protection include the lengthy term of protection, duration of author’s life plus seventy years, the ease of gaining protection, and the international standardization of copyright protection, which allows easier enforcement internationally. One disadvantage to copyright protection is that the software is considered a “literary work” and thus is only protected if it is verbatim plagiarized. Non-literal infringement is judged by a “substantial similarity” standard comparing the two works. As can be imagined, it is sometimes difficult for judges to understand the highly technical program language similarities.