Damages for breach of warranty are designed to put the claimant in the position it would have been in had the warranty been true, whereas damages for misrepresentation are designed to restore the claimant to the position it would have been in had the misrepresentation never been made.  In some cases, the same facts may support either a breach of warranty claim or a misrepresentation.  This issue is tricky since the measure of damages can be significantly different; monetary damages for breach of warranty. as opposed to rescission of an agreement for a misrepresentation

A warranty provision, generally precludes liability for representations since it would be incongruent to negotiate limitations on liabilities for warranties and remain liable without limitation for representations.  Moreover, in order to give rise to a misrepresentation claim, it is essential that a claimant be induced by the representation to enter into the contract.   This creates a timing problem because something that is contained in the contract (and therefore has no effect until the contract is signed) cannot be said to have caused a party to enter into the contract.

To be certain, warranty provisions should clear and unambiguous.  Add a stipulation that any misrepresentation claim based on a warranty is limited to an amount equal to the corresponding warranty claim.  And an express provision that the parties have not relied on any oral or written representation not contained in identified documentation and otherwise that waives any rights not conferred by the contract.

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In a recovering economy revenues might be on the rise, but profits are still the key to success.  Global structuring continues to hold its place as a one method of increasing profits.  U.S. tech companies implement the most aggressive global structuring position.  Tech companies, in particular, can easily operate across borders, locating the head office in low tax jurisdictions.  According to the Organization for Economic Cooperation and Development (OECD), 37 of the top 50 U.S. tech companies use a global structure that effectively realizes greater profits in countries with lower than average corporate tax rates.

Both low tax jurisdictions and no-tax jurisdictions can be considered tax havens.  Surprisingly, low tax jurisdictions often result in a lower combined corporate tax rate than, no-tax or zero tax jurisdictions.  The busiest tax havens currently are Ireland, Switzerland and the Netherlands.  I predict this will change, perhaps before the end of 2014, but more likely significant changes are at least five years out.  One reason for the change will be plans by the OECD to redefine the “permanent establishment” concept.  It is expected that any revision of the attribution of profits rules including permanent establishment will impact other areas of global structuring, including transfer pricing.

So will no-tax jurisdictions, the true “offshore” countries create competition for low tax jurisdictions?  The answer is “yes.”  Tax free jurisdictions will gain in popularity as low tax jurisdictions are forced to adopt the changes the OECD has in mind.  International companies will once again tweak their structures to reduce overall tax burdens.  Tax free jurisdictions tend to have a lower population and lower tax base.  These jurisdictions need to attract business to create jobs and boost their economy, which can be accomplished without imposing income tax liability.

Need assistance with your global structuring?  Contact me at wkcantab@cantab.net

Technology advancements have provided the means for businesses to grow their products, services and consumer base, both nationally and globally. Using electronic communications to form contracts, whether by website purchases or by e-mail correspondence, businesses must have confidence in the validity and enforceability of those contracts and whether they can be evidenced in court proceedings.  Much of the business’ confidence, or lack thereof, is derived from electronic and digital signatures. While the legislation in the U.S. is clear and tested in court, international legislation is untested or, depending on the country, doesn’t exist.

U.S. Legislation. In the U.S., there are two primary pieces of legislation that govern digitally-created contracts, namely: the E-Sign Act and the UETA, or the Uniform Electronic Transactions Act.  The E-Sign Act is a piece of Federal legislation that prevents electronically-created documents and contracts from being held out of evidence simply because they were created digitally or electronically. The UETA has served to provide a singular law amongst the States to prevent confusion in this area.  It has been adopted by 47 states, though the remaining three states do recognize electronic signatures.

Not only are UETA electronic signatures allowed and recognized by law, but have proven to be even stronger evidence in court than a written signature. In order to meet the guidelines set forth in UETA, most companies employ e-signature and electronic contracting software and the services of vendors. Choosing a specific e-signing vendor will depend on the type of business and the types of transactions.  Now that some of these products and services have been tested by the judicial system, determining which is best suited to a particular business or transaction can be complex and confusing.

Global Legislation. While most of the first-world nations have adopted legislation to deal with this matter, emerging markets may not have. Beyond that, the vast majority of legislation adopted globally has yet to be tested in court. This does create problems when commerce is reaching out to new places. Some countries with legislation include: Canada, Australia, New Zealand, the United Kingdom, the European Union and South Africa. These countries’ laws are extremely similar to the legislation in the U.S. but because of different nomenclature and being untested, there is some confidence to be built.

If your business uses electronic or digital signatures, would like to start or is looking for help in determining the efficacy in international transactions, please don’t hesitate to contact us in this matter.

The Foreign Account Tax Compliance Act (“FATCA”) is gaining momentum with Bermuda, Malta, the Netherlands, Jersey, Guernsey and Isle of Man signing bilateral agreements with the U.S.   The FATCA bilateral agreements target U.S. taxpayers with foreign accounts and allow for more comprehensive information reporting and imposes a 30% withholding tax on certain payments to accounts held by U.S. taxpayers.  FATCA was enacted as part of the HIRE Act, to ensure there is no gap in the ability of the U.S. government to determine the ownership of U.S. assets in foreign accounts.

With such momentum FATCA is gaining international support.  Offshore jurisdictions are facing a dilemma, since payments made from a U.S. financial institution to a foreign account will be subject to a withholding tax if the information on the U.S. account holder is not provided.  Foreign financial institutions may enter into FATCA agreements individually, if permitted by local government.  But once signed, will the FATCA cause a decrease in business for the these countries?  Isle of Man, for example, is addressing the need for increased awareness of its availability of skilled talent in the financial services sector, hoping to forestall any downturn should foreign companies relocate to avoid information reporting requirements.

Additionally, a conflict could arise between FATCA and local data protection laws, which limit the cross border transfer of personal information.  Consent is often required before a such a transfer can be made, foreign financial institutions will be put in the position of closing accounts where consent is not provided.  Foreign financial institutions will be required to obtain consent to the transfer from the U.S. account holder.  This conflict will continue to arise and its complexity increase.

Businesses are collecting and processing more and more personal information.  Given the broad definition of personal information, the collection and combination of demographic and behavioral data from multiple sources can result in the identification of individuals and therefore is regulated by data protection laws.  Companies use this information for many reasons, to build customer profiles, store repeated behavior, forecast future behavior, reduce fraud, and errors.  Data protection and privacy concerns arise whenever personal information is collected and stored or processed, even to create a broad base marketing behavioral analyses.

The ease of collection, storing and processing data creates tremendous opportunities for businesses.  For example, a customer makes an online purchase of boating equipment, the company will have collected not just personal identification, but now knows the customer is a boater and can use that information for future marketing.  Amazon collects a tremendous amount of information from its e-readers.  The information collected can determine the types of books the customer is reading, whether they scan the book, jump to the end or never finish it.  With this information Amazon thinks they can predict what you will read next and market appropriately.

The question is whether the company is properly informing the customer about how it will store and use the personal information.  Blanket permission for a use of personal information may not be sufficient any longer.  Some data protection laws require consent be obtained for each use and re-use of personal information.  This imposes a significant burden on the use of personal information for the purposes of producing useful data analytics particularly where the personal information is anonymous.  Nevertheless, personal information obtained from multiple sources can be used to identify an individual and is therefore regulated.

Consumer analytics are often used by various different companies and departments and therefore, when using consumer analytics, even so called “anonymous” data, sound training and education regarding date protection laws is essential.

We’re here to help.  Find our details on the Contact page.

California lawmakers have been busy making changes to the State’s current online privacy regulations. The first changes will come into effect today whilst another change will be effective starting in 2015. The Legislature has changed California law to make privacy policies and information gathering more transparent, protect online children and minors’ information and advertising exposure and finally, to expand on online data security breaches.

Do Not Track Law. Commercial Internet websites and online operators, including mobile apps (collectively “commercial websites”) collecting information from California residents will have to comply with new regulations starting today when the California Assembly Bill 370 (“AB 370”) comes into force as an amendment to the Online Privacy Protection Act (“CalOPPA”).  California has unanimously approved the first “Do Not Track” law in the world. Prior to this amendment CalOPPA required commercial websites disclose to the consumers the categories of personal information to be gathered within its privacy policy and with whom this information might be shared.  AB 370 has been added to require commercial websites to fully describe how they respond to Do Not Track settings in web browers and whether third parties can access and collect their information across a network of sites. Though the new regulations will not require the websites to honor Do Not Track signals, there will be more transparency for the consumers.

Shielding Children. Protecting children and minors online has also been part of the agenda this year for the California Legislature. Senate Bill 568 will protect online minors from more adult advertising by requiring that websites directed towards children and minors do not advertise products and services that a person of their age would not be able to partake of. Additionally, these websites will be required to give children and minors who have registered with the website more content control, thus allowing them the ability to delete content they have posted more easily. This amends CalOPPA by seeking to protect all minors, rather than the under 13 that CalOPPA applies to currently.

 Data Security Breaches. Also coming into effect today, Senate Bill 46 which amends the California Data Breach Notification law, to extend the current breach notification requirements to compromised log-in details, usernames and email addresses. Starting today, if these details have been compromised, the company will have to provide notification to the effected Californian, advising them to make changes to protect themselves.

For assistance with assuring that your company’s website and online presence adopt and follow these new regulations please contact us.

Following the latest major security breach, this time aimed at Target Corp. in which data connected to approximately 40 million credit and debit card users was stolen, over a dozen lawsuits have been filed, including 3 class action lawsuits.  The claims range from negligence in failing to protect customer data, to invasion of privacy, to failure to notify of the breach.  And a number of states have breach notification laws requiring the attorney general be notified.  This could also that governmental action will be taken possibly resulting in fines and penalties.

Civil lawsuits are becoming more prevalent to enforce data privacy policies and data protection laws.  Thus far, the biggest hurdle to overcome by plaintiffs, is proving damages.  Courts have dismissed a number of these suits simply because the plaintiffs could not establish that the data breach caused the plaintiff injury.  Plaintiff’s schooled off previous cases are becoming more clever in carefully in establishing damages.

One of the early cases, Burrows v. Purchasing Power, LLC, 12-cv-22800-UU (S.D. Fla. Oct. 18, 2012), filed claims for identify theft, negligence, invasion of privacy, and a violation of Florida’s Deceptive and Unfair Trade Practices Act.  The Plaintiffs, employee’s of Winn-Dixie, alleged that Winn-Dixie failed to protect and secure their personal information from theft.  An employee of a Winn-Dixie service provider, Purchasing Power, had obtained the Plaintiff’s personal information and misused it.  The case was eventually settled, and the defendants were required to maintain rigorous security safeguards going forward.  In order to receive settlement proceeds the plaintiffs had to prove they were victims of fraud and the circumstances of any loss.

In another case, there was no data breach, rather the plaintiffs alleged that their personal information was collected and sold to media outlets without their consent.  The claims included violations of the Electronic Communications, the Computer Fraud and Abuse Act and the Stored Communications Act.  This Seventh Circuit upheld certification of the class action, giving little weight to the defendant’s argument that the plaintiffs would each have to establish damages.

A Massachusetts law, the Song-Beverly Credit Card Act, prohibited retailers from collecting ZIP code information, thus preventing retailers from using ZIP code to find other personal information.  The Massachusetts Supreme Judicial Court broadened the term “personal information” to include ZIP codes and allowed the plaintiffs to proceed without having to establish that their data was compromised.

The number of cases involving claims of breach of data privacy or unauthorized use of information will undoubtedly continue to grow.  Businesses must keep vigilante to ensure compliance data protection laws wherever customers are located. Take precautions to avoid inadvertent breaches and update data privacy policies at least bi-annually.

Contact us if you need assistance maintaining an up-to-date data privacy policy.

The Italian Parliament just passed a new law requiring Italian companies to purchase web-based advertising solely from companies with a registered Italian VAT number.  This is clearly aimed at large web-advertising companies such as Google, Amazon.com or Apple, that sell web-advertising from subsidiaries based in other countries.  Google, for example, sells EU advertising from its subsidiary in Ireland, minimizing income subject to Italian income tax.  Corporate income tax in Ireland is 12.5% on trading profits, whereas Italy corporate income tax is a much higher 31.4%.

Generally speaking, VAT is taxed in buyer’s location or the place tangible goods are delivered; however, VAT on electronic goods and services are charged in the seller’s location.  This new law requires Italian companies to purchase web-advertising from local companies, thereby capturing VAT on the transaction.  To register for an Italian VAT number the company would have to maintain a local presence, thus increasing the income taxable in Italy.  If enforceable, this would be a win-win for Italy, by increasing its revenues twofold.

The new law, however, is highly criticized.  As drafted, the new law is contrary to EU fundamental freedoms and laws such as the EU Distance Selling Directive, and the principles of non-discrimination found in the double tax treaties in which Italy is a party.  Thus, its enforcement is doubtful as currently adopted.  But its introduction will be carefully watched since many other EU Member States are struggling to find new methods of capturing income within their borders in order to increase their tax base.  The Organization of Economic Cooperation and Development is scheduled to study the issue in 2014.

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Do you think that a service based business doesn’t create intellectual property?  Think again, you may be ignoring a valuable asset.  Intellectual property can be found in business processes and data collected.  Business processes created and used by the business can be copyrighted, and licensed to others.  The brand can be trademarked and licensed, or franchised.  Don’t overlook the revenue that can be derived from the exploitation of the business intellectual property.

Every business collects data covering a wide range of information.  Information about their products, competitors, customers, market and industry, and more.  Some of this data is publicly available, some of it has been collected from consumers, customers or service providers , and although protected by data privacy laws, with consent, can be integrated with other data to create a useful tool for your business.  This aggregated data also has value not simply for direct use for the business, but can be useful to other businesses.  Thus, it can be sold to create a distinct revenue stream.  The value will be determined by its collection and usefulness and the method employed to exploit it.

Specific data can be licensed through data-specific license agreements.  The business database can be licensed by using a subscription license model, a license for access to specific content and through a distribution or reseller network.

License agreements should be well drafted, clearly set out ownership, use, collection, resale, fee and termination provisions.  Business intellectual property, whether or not patentable, can find protection as a trade secret, copyright, or perhaps patent.  To ensure your business intellectual property is preserved and protected, retain copies of how, for example, data is collected and stored, or in the case of processes, how the processes were generated.

To find out how we can assist you in identifying, protecting and exploiting your business intellectual property contact us now.

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In 2014, the impending and almost certain to be enacted EU Data Privacy Directive, the strictest and the most comprehensive to date, may create an artificial boon for EU companies.  This year, with news that the NSA readily accesses data collected and stored by U.S. cloud companies, such as Google, consumers and companies alike are looking for an option that provides greater security and greater anonymity.  EU companies, and any company collecting information from an individual located in the EU will have to abide by the rigourous articles set out in the Directive.  This just might provide a competitive advantage to EU companies.  Consumers may be more likely to seek out companies that comply with the Directive to purchase goods or services.

One of the primary tenants of the EU Data Privacy Directive is control over personal information.  Every individual will have control over the collection, storage and use of his or her personal data.  Explicit consent from the individual will be required.  And that control will not end with a one-time simple expression of consent.  Individuals, will retain the right to access his or her personal information, make changes, and if so desired, the right to have personal information deleted completely.  Companies that do not comply will face significant penalties.  U.S. companies that currently maintain personal information on EU citizens will have to comply or suffer the risk of steep fines.

There is no comprehensive federal U.S. law governing data privacy, nor is there likely to be one soon.  A number of states are enacting data privacy laws, but the focus has been on protecting information primarily related to health and children.  Implementing a U.S. federal law as comprehensive as the EU Data Privacy Directive seems not just unlikely, but impossible.  Data collection is a huge industry and revenues generated and potential jobs created could assist in the current economic recovery.  Following enactment of the Directive, however, U.S. companies may have to step in line or risk alienating their customers.