Uber battles lawmakers to capture Taiwan market

By Ramona Barrett

December 2016

Uber entered the Taiwan market in 2013.

Outraged by its growing popularity, local taxi drivers held a major protest earlier this year.

Luckily, or so it seemed, they found an ear in government.

In an effort to protect the domestic taxi industry, which includes 80,000 legally operated cabs, the Taiwan government has subject Uber to increasing legal obstacles.

Though, instead of curbing to pressure to leave the market, Uber has gone toe-to-toe with the government, challenging it to bring its laws up-to-date with innovation in the industry.

Uber is registered in Taiwan as an information services company, though it is a well-known transportation company.

Taiwan views this as a major misrepresentation of its services.

To make matters worse, it operates its transportation services illegally by using private drivers and cars without business operation permits.

In addition, according to Taiwan Vice Transportation Minister Wang Kuo-tsai, they fail to honor labor and health insurance premiums for private drivers, or to settle disputes between private drivers and consumers.

To comply with existing rules and regulations in Taiwan, Uber would need to apply to the government to set up a legal taxi service company and employ qualified drivers and taxi cabs.

Making it clear that Uber would need to fall in line, Wang stated the “government won’t enact a new law or amend the existing rules just for one single company.”

Still, Uber refuses to do.

Uber Taiwan’s general manager Ku Li-kai stated that Taiwan does not need another taxi service company, and setting one up is not in line with their business model.

Instead, they would be willing to negotiate with the government for a more mutually beneficial plan.

Keep in mind that Taiwan is one of Uber’s fastest growing markets, with approximately 10,000 registered drivers and 1 million members.

Back in July, Taiwan announced a three-pronged approach to curb Uber, and it appears to be following through with its plans.

Just a month later (August), Taiwan ordered Uber to pay back taxes owed since it entered the market in 2013, an amount then estimated to be a hefty $6.3 million.

This came as a result of the Taiwan government changing its tax structure for foreign online businesses, bringing Uber on the hook.

In response, Uber told Reuters: "Uber is meeting all of its tax obligations under relevant local laws."

In an alternative attempt to curb Uber, just last month (November) Taiwan called for Apple and Alphabet (the parent of Google) to remove Uber, as well as its newly launched UberEATS, from their mobile application stores. 

“Uber has not done what it says it will do. So, we are looking at another way by requesting its apps be removed from Apple and Google [app stores],” said Liang Guo-guo, spokesperson for Taiwan’s Directorate General of Highways.

They did not clarify how they would handle already downloaded Uber applications.

In addition, it remains to be seen if people will find alternative ways to download the application.

Uber has expressly challenged the island to amend its laws to keep up with innovation in the industry, as it faces being potentially banned due to regulatory breaches.

Uber’s chief adviser David Plouffe warned, if "Taiwan wants to be a Silicon Valley of Asia, potentially pushing out an innovative company like Uber is not the right message."

Otherwise, they might just get left behind.

He pointed out that other countries have actually been supportive of Uber, passing more than 100 laws to allow them to operate more smoothly.

He also noted some of the benefits of allowing Uber to remain, including more jobs and spending to stimulate their economy.

An open letter penned by Uber stated, “by promoting Taiwan as ‘Asia’s Silicon Valley’ and appointing a digital minister, your commitment to establishing a tech-friendly policy environment for startups to thrive is clear,” but the legal obstacles posed “directly threaten the interests of over a million Taiwanese citizens, especially the mothers, fathers, retirees, professionals, and the otherwise unemployed who have come to rely on the economic opportunities Uber has created.”

Taiwan did not answer that call in the way Uber had hoped they would.

Back in July, Taiwan’s three-pronged approach to cracking down on Uber included slapping them with hefty fines until they succumbed to legalizing their operations.

Several amendments were proposed to the Highway Act for illegal transportation services, including an increased penalty, revocation of driver and vehicle licenses for up to two years, and a 10% reward for reporting illegal activity.

To fight back, Uber published advertisements on the front page of four major newspapers in Taiwan.

One advertisement stated: “The government suppresses new technology. So much for Asian Silicon Valley!”

Another read: “We embrace the power of moving the nation forward, but the government is imposing a NT$25 million penalty as a barrier.”

The advertisement also encouraged people to sign a petition asking the Taiwan government to amend the Highway Act to list Uber as “internet transportation service providers.”

Uber was not successful in its attempt to sway lawmakers.

Last week, the Taiwan legislature passed the amendment bill that will drastically raise the maximum fine for illegal passenger transportation services from between NT$50,000 (approximately $1500) and NT$150,000 (approximately $4600) to up to T$25 million (approximately $780,000).

This is the highest level for illegal transportation services fines in the world.

This is even higher than the fine for drunk driving on the island.

To date, Uber has racked up NT$66.05 million worth of fines, and their drivers have been fined NT$20.028 million on the island.

UberEATS motorcyclists who deliver food have also been fined.

In the past, Uber operations have suspended sporadically due to police coming down on them.

But as a result of this new law, provisions of which are expected to take effect next year, operators may have to close up shop for good.

In response, Uber stated “we are very disappointed to see the Legislative Yuan pass the amendment bill raising fines against driver-partners on the Uber app to the largest anywhere in the world” but “we will continue to seek a constructive conversation with the Taiwanese government to ensure Taiwan gets the full benefits that ridesharing brings to riders, drivers and cities. We will also study the legislation before deciding on our next steps.”

Just days after the Highway Act amendment was passed, Uber Taiwan began a new campaign offering coupons worth up to NT$10,000 (US$312) to customers for posting a selfie with an Uber driver (and a corresponding hashtag) on Facebook.

Some drivers were reluctant to appear in the selfies for fear of it being used as evidence against them in light of the new amendment.

Based on recent events, it seems this battle between Uber and Taiwan will not be ending any time soon.

Note that Uber has been encountering similar legal obstacles in other Asian markets, including Japan, Korea, Thailand, and Vietnam.

In the US it is banned in specific parts of Alaska, Alabama, Florida, New York, Texas, and the entire state of Nevada.

Sources:

-        http://www.chinapost.com.tw/editorial/taiwan-issues/2016/11/21/484530/p1/Startups-need.htm

-        http://fortune.com/2016/12/16/uber-taiwan/

-        http://fortune.com/2016/11/16/taiwan-apple-google-uber-app-store/   

-        https://international.thenewslens.com/article/56189

-        http://www.chinapost.com.tw/taiwan/business/2016/07/19/472671/MOTC-announces.htm

-        http://mashable.com/2016/08/22/uber-taiwan-tax/#Poz.Cug5YSqq

-        http://www.pymnts.com/mobile-applications/2016/taiwan-asking-apple-google-to-pull-uber-app-from-their-app-stores/

-        http://asia.nikkei.com/Business/Companies/Uber-chief-adviser-pushes-ride-hailing-service-s-case-in-Taiwan

-        http://www.forbes.com/sites/ralphjennings/2016/11/18/uber-is-getting-an-upper-hand-in-hostile-but-pivotal-taiwan/#784f9cec30f7

-        http://www.thedailystar.net/bytes/the-uber-controversy-1321321

-        http://www.taipeitimes.com/News/taiwan/archives/2016/11/29/2003660218

-        http://www.thestar.com.my/tech/tech-news/2016/12/19/uber-says-disappointed-by-taiwan-law-raising-ride-sharing-fine-to-highest-level-globally/

-        http://www.afr.com/technology/web/ecommerce/uber-drivers-face-1m-fines-as-taiwan-opposition-grows-20161206-gt5hbh

-        http://www.taiwannews.com.tw/en/news/3055203

News Startups: Different parts of the world, different rules you got to follow

By: Entrepreneurship & Innovation Clinic Student

December 2016

After the 2013 Meltwater case, news aggregation startups became unable to adopt fair use as a defense against the copyright infringement claims in the United States. Even a fraction of the original news, as few as four words from the headlines or ledes, used in thumbnails would be considered as a copyright infringement on the original news publisher. Most news aggregation startups, however, do not limit their target customers to the United States. Once an app is successfully developed, a startup can easily expand to the global market without much further cost. In this article, we will review how the other parts of the world regulate this murky area of internet copyrights.

In 2013, United Kingdom Supreme Court reached surprisingly different outcome from the U.S. Meltwater case with same questions and essentially the same nature of plaintiffs and defendants. Public Relations Consultants Association v. The Newspaper Licensing Agency Ltd. ([2013] UKSC 18, on appeal from: [2011] EWCA Civ 890 ) The U.K. Supreme Court ruled that Meltwater Group in U.K.’s Search & Link service without license within the news aggregating app did not infringe the copyrights of the original news publishers under the current Copyright law in the UK. Meltwater provided an online media monitoring service called Meltwater News. Subscribers to the service were sent emails containing the headlines of online articles, hyperlinks to the articles' publishers' websites and short extracts of the articles themselves. UK Supreme Court strongly expressed the view that the temporary copies exception should apply to on screen and 'cached' copies of copyright protected works generated in the course of ordinary browsing. Under the EU copyright law, CJEU ruling also decided that the linking itself is not a copyright infringement. See Svensson and others v Retreiver Sverige, (C-466/12). In Svensson, the CJEU ruled that a website providing links to copyright-protected content on another site was not, in and of itself, copyright infringement.

Along with many other European jurisdictions, Germany does not have a clear recognition of the concept of fair use or fair dealing as a defense of the copyright infringement. Currently, providing Search & Link service without a license within the news aggregating app may have a legal problem in Germany especially after the 2013 amendment of Copyright Law with ancillary copyright for press publishers. Article 8 of the Act of 1.10.2013 (Federal Law Gazette I p. 3714) When the German Publishers had demanded a royalty from Google News in 2014, however, Google had started removing snippets from the Google search result. As a result, the publishers faced plunge of traffic to their web page and a severe drop in revenue. Consequently, the majority of publishers granted royalty-free licenses to Google to ensure that their content to be included in Google News once again. See “Germany's top publisher bows to Google in news licensing row.” The German Copyright law prohibits news aggregators’ free-riding from the Search & Link business model; however, German publishers and the regulating body found it difficult to force huge news aggregators like Google News to pay the royalty fee.

In South Korea, providing Search & Link service without a license within the news aggregating app may not have a legal problem under the current Copyright law in South Korea. Recently, South Korea Supreme Court ruled that Search & Link service itself is merely a service of providing a passage to a location of the information on the internet and therefore does not constitute illegal reproduction or transmission of news articles under the current Korean Copyright law. 대법원 2009. 11. 26. 선고 2008다77405 판결, 대법원 2010. 3. 11. 선고 2009다80637 판결.

Canada might be the best country in the world right now for news aggregating startups. In Canada, providing Search & Link service without a license would not face any copyright infringement claim under the current Copyright law in Canada. See Warman et al. v. Fournier, FC 803 (2012). The controversy involved three separate claims for infringement of copyrighted works. When Fournier posted an excerpt of the article, Warman alleged that the posted excerpts were substantial reproductions of the work within the meaning of section 3(1) of the Copyright Act. The court, however, found that there was no infringement. In determining substantiality, the court applied a five-part test. The relevant factors to be considered include:

a. the quality and quantity of the material taken;

b. the extent to which the respondent’s use adversely affects the applicant’s activities and diminishes the value of the applicant’s copyright;

c. whether the material taken is the proper subject-matter of a copyright;

d. whether the respondent intentionally appropriated the applicant’s work to save time and effort; and

e. whether the material taken is used in the same or a similar fashion as the applicant’s.

The court ruled that the posted headline, three complete paragraphs and part of a fourth were the opening “hook” of the article and determined that it was not substantial to be a copyright infringement. The court further stated that even if the posted portion is substantially enough to be considered as a copyright infringement, Fournier’s reproduction constituted fair dealing for the purposes of news reporting, pursuant to section 29.2 of the Canadian Copyright Act. In determining whether the fair dealing is appropriate defense of copyright infringement, the court considered 6 fair dealing factors, (1) the purpose of the dealing; (2) the character of the dealing; (3) the amount of the dealing; (4) alternatives to the dealing; (5) the nature of the work; and (6) the effect of the dealing on the work. Balancing all the factors together, the court found that “the reproduction… falls within the fair dealing exception for the purposes of news reporting.” For the linking, the court also ruled that a hyperlinking is a mere redirection to the original content and not a copyright infringement.

From the above cases, we can see that each nation approached differently on copyright issues in Search & Link business. Unlike in the States, most of the world do not Search & Link as a blatant copyright infringement. Instead, they view it as a providing mere passage to the original article and usually do not forbid when such linking entails headlines or thumbnails from the original contents.

IP protections

By: Entrepreneurship & Innovation Clinic Student

December 2016

            Many start-ups and small businesses start with an idea. They grow around that idea, nurture it, grow it, and soon they have a successful business. But how can you protect that idea? That is where intellectual property and the various kinds of protections come in. Intellectual property protections vary, but their ultimate goal is to protect the work that has come from your idea. Many individuals hear about the different types of intellectual property and think that they want one type, when in reality they another may be better suited for their needs.

            There are four main types of intellectual property: copyright, trademark, trade secret, and patents. Each of these types of intellectual property protect a different type of work. Some, however, do overlap. The protections offered by each type of intellectual property also differ and are better suited for certain situations. Keep in mind, intellectual property only protects the expression of ideas, not the ideas themselves. You must do something other than just having an idea in your head.

            A copyright is the exclusive right to print, publish, reproduce, create derivative works, and license a work of art. A work of art is a rather broad definition. For example, it includes the traditionally thought of forms of art such as paintings and books, but it also includes the code of software. However, in order to be eligible a copyright must meet three requirements. First, a copyright must be fixed in a tangible medium. For conventional art this is simple. A painting or a book are painted or printed on something physical. For other forms of art this is more difficult. Look at software code for example. It is written on a computer, but this is sufficient to be considered fixed for copyright. The second requirement is that the art is original. Essentially, this means you cannot copy someone else's work. Finally, the work must meet a minimum level of creativity. You must add something to the art that is creative, though this is a very low threshold. Keep in mind, a fact cannot be copyrighted, because there is no creativity here. However, a book on alligators that contains many facts can be copyrighted because there is creativity in the words you chose and the way the facts are presented.

            Copyrights give a host of protections for the works they protect. As above, you can print, publish, reproduce, license and creative derivative works (works based on the original, such as sequels or movies based on a book) exclusively. A copyright comes into existence the moment that the work of art is created. You do not need any additional steps to actually get the copyright. However, if you wish to actually enforce your protections, via court orders, lawsuits, etc. then you must federally register your copyright with the US Copyright Office for a relatively low fee. Once registered, a copyright will last for the life of the author plus seventy (70) years. After this, the art goes into the public domain and can be used by anyone.

            You may want to get a copyright for any art that you create. This is the most obvious use. But also for things that you plan on creating sequels or derivative works of. Copyrights are excellent for software codes as well because code is something that is modified fairly regularly with updates, so a copyright will automatically attach with these updates.

            A trademark protects an entirely different work than a copyright does, though the actual subject may be the same. A trademark is a word (or phrase) or design that a business uses in commerce. Essentially, a trademark is used to protect your brand. Trademarks have fewer requirements than copyrights. A trademark must be used to designate a source of a product (the producer) and used in commerce. For example, a label on a product would be a trademark. The mark could be a series of words or a design. However, certain marks cannot be protected. Generic trademarks just describe a category of products or services. For example, you could not trademark the mark Jacket for a line of jackets. Descriptive marks are also too general and generally describe an aspect of the good. The mark Leather would likely be considered descriptive if it were for a line of leather jackets as it describes a part of the goods. Descriptive marks can, however, pick up secondary meaning. This means the mark is so tied with the product that it gains a new meaning and people think of the product when they hear the mark. This generally takes place over time. An arbitrary mark is protectable because the meaning of the word is unrelated to the goods. Using the mark Book for a line of jackets would be this. Finally, fanciful marks are protectable and are essentially made up words. For example the made up work "Anter" would be a fanciful mark on any product.

            Keep in mind, trademark protection only allows you to prevent other people from using your mark in commerce if it is being used for the same type of goods you make. You could prevent someone from using the Book mark for a line of jackets, but not if they use the mark Book for fresh produce. Most states have common law trademarks that begin the moment the mark is used in commerce (federal trademark protection uses this date as well) but they are limited to the state and general area the product is sold. Federal protection applies throughout the country and must be registered with the US Patent and Trademark Office (USPTO).

            Trade Secrets function differently. A trade secret is a type of technique, recipe or business model that a business uses and wants to keep secret to prevent competition from having it. There are six factors that are considered in determining whether something is a trade secret. These boil down to whether or not the trade secret has been kept as a secret. If it has, then an employer can generally prevent their employees from divulging their trade secrets to others. It is especially useful in preventing corporate espionage and preventing former employees from giving away trade secrets to their new employers. The Uniform Trade Secret Act protects trade secrets at the state level. Not all states have adopted this act, however, and thus each state may have some differences. There is no federal trade secret protection. The benefits of trade secrets are that they do not cost anything to protect and there is no need to register it. Simply keep your practice secret and include clauses in contracts in order to treat the practice as a trade secret.

            The last type of intellectual property is patents. A patent protects inventions. In particular, getting a patent in an invention grants you the sole authority to sell, create, and distribute the patented object. Inventions include the things most people think of, such as a light bulb or a type of television, but could also include software codes, algorithms, and biological constructs. They are filed with the USPTO. In order for an invention to be patentable it must meet several requirements. First, it must be a patentable subject matter, meaning it can't be something like art. It must also be novel. This means that the invention has to be new in some way, or at least a part of it is. Third, the invention must be non-obvious. The invention can't be something that just be simple to figure out or just an addition of one thing to something else. There needs to be an inventive step. Finally, the invention must be useful.

            While patents are often thought of as the most highly sought after intellectual property, they are particularly difficult to get. The USPTO has high standards for what they accept as an invention deserving patent protection. Furthermore, the protections are not limitless. Patent protection only lasts for twenty years; after which anyone can use the invention. Patents can also cost upwards of thousands of dollars to get. Therefore, getting a patent is not necessarily in the best interest of every business.

            Ultimately, it is up to the individual business to decide what is the best intellectual property protection to pursue. In some instances, this is easy, as there is no real question about whether something falls into one category and not the other. But in others there may be some confusion. For example, would a copyright or a trademark be better on a logo? Would both be beneficial? Having a knowledge of the different types of intellectual properties can help with this decision. 

They’re Scary Good: Investment in Sports Startups

by: Kayla Acklin

December 2016

“. . . stolen away, and cleared out to center ice to Pominville. Pominville, into Ottawa territory. Pominville goes around Alfredsson, cuts in front, S-C-O-O-O-O-R-R-R-E-E-S-S-S! JASON POMIVILLE, SHORT-HANDED! OH NOW DO YOU BELIEVE? NOW DO YOU BELIEVE? THESE GUYS ARE GOOD, S-C-A-A-A-R-R-Y GOOD, AND THEY ARE GOING TO EITHER CAROLINA OR NEW JERSEY! THE BUFFALO SABRES KNOCK OFF THE SENATORS IN O-O-O-V-V-E-E-R-R-T-I-M-E!” Every Buffalo Sabres fan remembers the legendary play-by-play broadcaster Rick Jeanneret’s announcement of the 2006 playoff overtime win by the Buffalo Sabres over the Ottawa Senators. With grand enthusiasm and lungs that just won’t quit, Jeanneret’s “Now Do You Believe” sparked a fire that the city of Buffalo hadn’t seen since the early 90’s. That iconic moment signifies the culture that the sport of hockey has brought to the city of Buffalo, NY.

With sports moments like the one above that still send shivers down the spines of hockey fans, it’s no wonder that investors are looking to sports startups for their next ventures.  Sports are such a vital part of our social and economic culture. When a professional sports team wins a major title for the first time in 108 years, or a “hot-shot” professional athlete controversially dopes during playoffs, that news makes the front page of every major newspaper, and is covered by every major news media outlet. The reach of professional sports on the market is undeniable. As such, startup companies who take advantage of society’s dedication to sports by designing efficient, easily accessible sports-based applications and programs find quick success and high valuations from interested investors. Evidencing the high value of sports and sports fans, in 2015, venture capitalists alone invested more than $1 billion in venture deals with sports startup companies.

What Makes Sports Start Ups Successful?

 TechCrunch detailed four major reasons for why sports startup companies are “scoring big.”

1.      “Obsessed” User Base: It would be an understatement to say that sports fans are passionate; many, arguably, are obsessed. Sports fans dedicate a lot of time to watching games, researching their favorite athletes, and tracking the success of their sports teams. For this reason, a technology service or product that allows sports fans to more efficiently monitor the success of professional and collegiate sports players and teams comes with an automatic user base. These “obsessed” sports-fans become long-term users who will “opt into notifications, click through suggested links and, most importantly, be engaged and interested.” With such a dedicated sports-fan user base, sports startups have been able to avoid retention problems that plague other technology-based startups. A study by Flurry indicated that sports-related apps are the third highest in user retention, at 67 percent retention, falling behind only weather and reference apps.

2.      Controlling Sports Stats: The increasing popularity of fantasy sports has led to more fans paying attention to sports statistics. Particularly with daily fantasy sports, fans carefully analyze each sports player and team, watch for trends in performance statistics, and select which specific athletes and teams to invest in. For example, DraftKings, one of the largest daily fantasy sports companies in the United States, raised $375 million by 2015, with an active daily user count of over 50,000. Fans care about even the smallest statistics regarding professional players and teams. Therefore, a sports startup company with an application that provides in-depth analysis of sports statistics is almost guaranteed to be successful.

3.      Riding the Backs of Partnerships: For many technology startups, partnership with successful companies is often too difficult because of the slow nature of business cycles. That is not the case in the sports world. When one company signs a partnership deal with a professional sports team, other companies are eager to follow suit to reap similar financial benefits off the success of other professional sports teams. For example, when the MLB released MLBAM, a video streaming platform, the NHL saw a great opportunity to offer their fans the same experience, and signed a deal with MLBAM. Sports leagues and companies in particular are constantly looking for ways to enhance their fans’ sports interaction experiences. A sports startup with an app that provides increased opportunity for fans to engage with their favorite sports players and teams will undoubtedly garner the attention of sports leagues and companies.

4.      Who’s Ready to Rumble: The World Series, Super Bowl Sunday, March Madness Week, and the Stanley Cup Playoffs are on every serious sports fan’s calendar from the start of the sports’ season. During these big games, fans are on every social media site, are watching all major media outlets, and are reading as many sports articles as they can to stay engaged with their favorite teams. Fans look for any opportunity to win seats to the big games or purchase specialty merchandise to show their undying support. Startup companies should take advantage of these big games by planning promotional events, offers and contests in conjunction with these major sports events.  

Sports Start Ups Grab Investor Attention

Sports are not a fad, and sports fans are not going anywhere. As such, sports startup companies have found great investment success because venture capitalists recognize how “scary good” the sports market is.  For the second year in a row, in March, TPG Sports Group hosted a Sports Tank to provide sports startup companies the opportunity to pitch their business plan to a group of five investors, a Sports Advisory Panel and successful entrepreneurs. The goal of the Sports Tank was to give sports startup companies face-time with major investors to continue to grow the sports technology market. Ten sports startups were selected to pitch during the Sports Tank, including: Brizi, a company that uses in-stadium, fan controlled cameras to enable teams to grow sponsorship revenue by allowing teams to create fan-generated content; Bubbl, whose technology allows audiences to clip fifteen-second moments from online video streams; Dasdak, a company whose technology allows fans in stadiums to use their cell phone to order food and beverage or retail for delivery directly to their seat; IdealSeat, a company who focuses on all aspects of a fan’s experience, including ticket discovery, game-day decisions, and in-game experiences; and Matcherino, a platform that brings together spectators to play games against one-another, or watch their favorite matches together via a live stream.

The success of sports startup companies has also caught the eye of Silicon Valley venture capital funds and accelerators, meaning that the market for new sports technology is going to continue to grow. Most notably, 500 Startups, a venture capital fund and accelerator founded by Dave McClure and Christine Tsai that has incubated over 1200 companies since 2010, added six sports-based companies to their spring 2016 cohort. Those companies included: YouStake, a marketplace where fans can invest in their favorite players and profit from the winnings; OpenSponsorship, a company that democratizes access to sports sponsorships via a two-sided market; Phenom, a platform for young athletes to showcase their athletic achievements; Ader, a marketplace that connects brands to eSports influencers on Twitch; Mars Reel, a sports network for this young, network-driven generation; and ArrowPass, an integrated payment, vendor management, and ticketing system that helps arena operators eliminate lines and grow sales.                           

Boston Sports Start Ups to Watch

            In the words of Rick Jeanneret, sports startup companies “are good, s-c-a-a-a-r-r-y good,” and investors, both at the venture and individual levels, should pay attention. For those sports fans in Boston, here is a list of sports startup companies to keep an eye on:

1.      Ubersense – a mobile app that helps people improve at sports through video coaching

2.      Jokkspot – a location based sports management platform for athletes, coaches and fans

3.      BeeInPlay – enables users to find and book indoor training facilities (fields, turfs, rinks, etc.)

4.      Go Pro Workouts – provides digital and mobile pro athlete workout and nutrition plans

5.      Sports Lion – a social sports betting platform where players bet against one-another

6.      Spogo – rewards users for making correct predictions during live games

7.      LeagueNation – a mobile fantasy sports platform

8.      PlaybackID – the LinkedIn for athletes

9.      WhattaPlay – enables fans to post their sports opinions on a social sports page like the experts

10.  Fan Cred – provides live streaming, instant scores and the hottest sports takes

Healthcare and Startups

By Entrepreneur & Innovation Student

December 2016

Since 2010, there is probably no topic that has been more hotly debated than “Obamacare.” Obamacare, also known as the Patient Protection and Affordable Care Act (ACA) was designed to provide affordable health care to as many U.S. residents as possible. Over the last six years, the ACA has been slowly implemented to give individuals and businesses in America the time they need to adjust to the new health insurance industry standards and requirements. Almost the entire bill is nowimplemented. That means that businesses across the country could be facing big changes in regards to the health care coverage that they offer their employees and the costs associated with those changes. Whether you are starting a business or growing a successful one, it is important to understand the costs and obligations associated with choosing to offer health benefits to your employees.

1.      Understanding The Employer Mandate

Maybe the most frequently discussed feature of the ACA is the employer mandate. The employer mandate requires companies of a certain size to provide health care benefits to its full-time employees. Specifically, the ACA requires that “large employers” provide “minimum essential coverage” to at least 95% of its full-time employees. With the latest provisions of the ACA being rolled out this year, the federal definition of a “large employer” is one that employs 50 full-time equivalent employees.

Counting to 50

This number is a bit misleading on its face, as 50 full-time equivalent employees is a more complicated calculation than simply counting to 50. To start, an employee who works an average of 30 hours a week will be considered a full-time employee. In addition, part-time employees’ hours will be counted as fractional hours towards the large employer trigger. To calculate these fractional hours, a company must take the average number of hours worked by part-time employees and multiply that by the number of part-time employees. Dividing the product of those numbers by 30 will give you the additional number of full-time employees that the company must count towards the large employer trigger. If math isn’t your thing, TriNet provides an online calculator for employers to determine whether or no they are a “large employer”. The consequences of this kind of calculation means that employing a lot of part-time employees could lead to putting you over the 50-employee minimum for large employers and thus trigger your company’s obligations under the employee mandate. It is important to note, however, that the employer mandate simply requires an employer to provide minimum essential coverage to 95% of its full-time employees, not the part-time employees whose hours counted towards the employer mandate trigger.

Consequences of Non-Compliance

For a growing start-up that is constantly hiring new talent, this issue could pop up sooner than one might think. So, it is important to understand that non-compliance with the employer mandate can result in financial penalties for your company. If an employer is subject to the employer mandate but does not offer health coverage to its employees, it can be subject to a $2,000 fine for every full-time employee, so long as one-full time employee is receiving a federal subsidy for coverage on one of the ACA’s healthcare exchanges. Obviously, if you have many full-time employees this could be a huge fine. Yet, due to the way this fine is calculated, many smaller to medium sized companies with full-time employees have found it more cost effective to simply pay the imposed fines rather than taking on the costs of providing healthcare to its employees.

2.      Professional Employer Organizations (PEOs)

For the growing startups in places like Silicon Valley, employers are using Professional Employer Organizations (PEOs) like TriNet which are human resource companies that are attempting to help growing startups with the administrative hassle and costs that come with managing functions such as employee benefits. As most entrepreneurs would attest, they do not want, nor do they have the time to manage an employee benefits program. Companies, like TriNet, are there to ensure that entrepreneurs are in compliance with all the federal and state laws governing employee benefits. PEOs can also help entrepreneurs focus on their core business while allowing the PEO to implement a competitive benefit package to attract better talent to the company.

3.      Talk to Your Employees

So what is the deal for small companies that are not anywhere close to having 50 full-time employees on their payroll? Well, the answer is simple, those companies are not required to provide healthcare for their employees. In this case, it might be a good idea for the employer to speak to its employees about their options on the ACA’s healthcare exchanges. If you are a small employer and you are not offering a very large salary, it is very possible that your employees could qualify for a federal subsidy on the healthcare exchanges. If the employee’s income falls within 400% of the federal poverty level they would qualify for one of these federal subsidies to receive health coverage. 

Creating a Logo: The Importance of Owning Your Work

By Entrepreneur & Innovation Clinic Student

December 2016

Branding is an important part of building your business. It is a way for customers to quickly recognize your product. As such, a logo is an extremely valuable asset to your company.

Entrepreneurs do not always pay close attention, nor are they fully aware of the legal aspects of creating a brand. This could prove costly as you run the risk of not only lawsuits, but the forced abandonment of any logos or packaging and any associated goodwill. Below outlines some of the most common legal mistakes entrepreneurs make when building their brand.

1.         Hiring a friend or close associate to develop a logo without a written contract.

Lots of new business owners rely on favors. I know many business owners who call on friends to create logos. Such informal favors are lifesavers for a new business that has little to no excess funds. Without a formal contract, however, you are limiting your intellectual property rights to an implied license to use the logo for the limited purposes you originally imagined. For example, Suzie is starting an independent consulting firm, she asks her friend, Lizzie to create a logo for the website. As a result, Suzie will only own an implied license to use the logo on her website.

An implied license is also not exclusive. Exclusivity of rights can only be transferred through a written document. Suzie should have created a written agreement with Lizzie assigning any and all rights to the business. 

Under the work-made-for-hire doctrine, a business will own any copyrighted works created by an independent contractor if they agree to such terms in writing. Such contracts are easily obtainable online. It should be noted that this only applies to collective works (The Copyright Act contains a list of works that are covered under work-made-for-hire contracts). Therefore, it is important that any written work-made-for-hire contract includes a clause assigning any and all rights to the employer in the case that the relationship is deemed not to be a work-made-for-hire.   

2.         Assumed the company owns an employee created logo.

Under the “work-made-for-hire” doctrine, an employer owns any copyrightable work done by an employee within the scope of their employment. Many business owners assume that because an employee created the logo, it belongs to them. This is not always the case.

First, the employee must be an actual employee, not an independent contractor. A court turns to agency law and looks at the totality of circumstances to determine whether or not an individual is an employee. These factors include: who controls the manner and means of creating the work; is there a skill required; how provided the tools to create the work; where was the work done; is the relationship long-term or temporary; does the hiring party have the right to assign additional projects to the individual; who controls the working hours; is the hiring party involved in the hiring of third party assistants; is the work a part of the hiring parties regular business or are they in the business of creating logos; are there employee benefits; does the hiring party pay employment taxes.[1] 

Second, the work must be done within the scope of their employment, i.e. in line with the type of work the employee is employed to do. You must ask yourself whether it is likely that a person with a similar job title would take on such tasks. It must also be done within authorized time and space constraints. It is unclear whether this means during office hours or merely during the employee’s time as an employee. Additionally, it must be motivated at least in part by a desire to serve the employer.[2] 

Since it is not always clear who qualifies as an employee, it is in the employer’s best interest to enter into a contract with the employee.  Such a contract would state that the individual is considered an employee and that any works created are deemed created under a work-made-for-hire arrangement. Furthermore, the contract should provide a clause assigning any intellectual property rights to the employer should the individual be found not to be an employee.  Additionally, it may be prudent to include in your company’s employment contract a clause stating that the employee agrees that the company owns any copyrighted materials created during the DURATION of their employment.

3.         Using Stock Images to Build Your Logo.

There are many websites that offer stock images to graphic designers. If you should use these images, be sure you clearly understand the terms and conditions for the site and the ramifications of using such images.  For example, one site only grants a license for non-commercial use.  Another limits the commercial uses that are licensed or the duration of use. Additionally, the original artist retains ownership of the copyright. It is in your business’s best interest to create NEW art instead of using images with limited licenses. Your trademark logo is valuable, but it is not valuable if you have limited rights. You do not want to find yourself having to abandon a logo, which has become associated with all the goodwill you created.

4.         Only Changing One or Two Elements of A Stock Image or Found Image in An Attempt to Create a “New” Image.

If you or your designer is inspired by one of these images and use it as a basis for your own image, you should make sure that the images are different enough that you will not be seen as infringing that person’s copyright. Under The Copyright Act, infringement occurs in two situations: 1) when defendant had access to the original work and the copied work is substantially similar to the copy; or 2) the original and copy are strikingly similar and some access to the original image is reasonably imaginable. It does not matter whether you intended to copy a work or not. There is no set formula for determining whether the two works are sufficiently similar. Courts use different standards; such as the overall impression of the works and whether an ordinary observer would find the work misappropriated. A new business should avoid placing themselves in a situation where the originality of their logo is questioned. Any questionable works could lead to costly litigation and the possible abandonment of your logo.

[1] See Agency Law Restatement §220(2).

[2] This is the agency test used in Miller v. CP Chemicals. 

The Hardships of Regulation and Lobbying Interests When Breaking into the Market: The Recent Tale of a Silicon Valley Start-up Facing Opposition from an Established Industry

By: Entrepreneur & Innovation Clinic Student

December 2016

Start-up companies often face many issues when first launching their products, including procuring adequate funding and establishing a working business model. Beyond these internal issues, start-ups can also run into trouble with its competition, especially when that competition has enormous amounts of lobbying strength and money to devote to preventing newcomers from entering into the market. This scenario occurred recently when Airbnb, a Silicon Valley start-up company, was recently banned from operating in its biggest market, New York City, after a state regulation was promulgated.

Airbnb was created in 2008 as a marketplace for people to list and book short term rental accommodations, and has since grown to list almost three million rentals in more than 34,000 cities worldwide. The company capitalized on the “sharing economy,” which allows people to profit from monetizing existing assets, such as a spare room in an apartment, as rental space. The start-up has grown so rapidly that in the United States alone, one in ten people have used an Airbnb platform (such as either Airbnb or HomeAway) to stay in someone’s home for a period of time. However, Airbnb has been fighting local rental regulations throughout the United States over the past couple of years due to the fact that it operates in such a gray area. The company’s products, rentals of apartments and homes owned by all different landlords, are not long enough to be considered leases but also do not fall under hotel regulations. Thus, the hotel industry and cities have been fighting Airbnb’s presence in the market due to the fact that both parties stand to lose revenue from hotel occupancy and from occupancy taxes.

The biggest challenge to Airbnb’s success came this fall when the New York legislature passed a law in October that allows authorities to fine Airbnb hosts up to $7,500 if they are found to be listing a property for rent for less than 30 days at a time. The fine applies to dwellings designed for three or more families, so it is aimed specifically at Airbnb apartment rentals. The law would apply to about 22,000 listings in New York city alone and would affect the one billion dollars in revenue that Airbnb’s homeowners would collect in the city. Rentals of less than thirty days were actually illegal under New York law even before the October law was passed, but regulators struggled to enforce the law without access to the company’s rental database. This new law is a workaround that punishes anyone who advertises on Airbnb, which is much more far-reaching and easier to detect online.

The October law was promulgated due to concerns around lack of affordable housing in New York City, as affordable housing advocates worried that the company was making it easier to unlawfully rent apartment units for short time periods to travelers. This is an issue because those units are off the market for permanent residents, which drives housing costs higher. Regulators were also concerned that landlords would prefer to charge high nightly prices on Airbnb rather than making them affordable for residents to stay in long term, which would give preference to visitors over locals and thus change the dynamic of the city. In addition, in 2015 the New York state Attorney General’s office released a report which found that thirty-seven percent of revenue generated by Airbnb hosts came from hosts with three or more listings, which implies that hosts are running quasi-hotels while evading the law. While stating the motivating factors for the law, a spokesperson for Governor Cuomo of New York said that Airbnb’s rentals “compromise efforts to maintain and promote affordable housing by allowing those units to be used as unregulated hotels.”

Airbnb responded to the controversial New York law by stating that “in typical fashion, Albany back-room dealing rewarded a special interest — the price-gouging hotel industry — and ignored the voices of tens of thousands of New Yorkers.” The company’s sentiments reflect its frustration with the lobbying efforts of the large hotel industry, which have successfully mounted opposition to Airbnb in several other smaller cities and countries like Iceland, Barcelona, New Orleans, and San Francisco. The disparity between a start-up’s lobbying expenditures and an established industry’s spending can be substantial, which in turn can have detrimental effects on the future of a start-up’s profits. For example, start-up company Uber also has faced regulatory challenges and opposition from the strong taxi-cab industry, which has lead the company to be banned in several cities across the country, resulting in lost profits for the ride-sharing company.

Hours after the New York law was signed in October, Airbnb filed a federal suit against the New York state Attorney General Eric Schneiderman arguing that the law would cause irreparable harm to the company. The two parties have since settled the case and are currently discussing how to best resolve the case in a way that would benefit both the state and the citizens of New York City. As Airbnb continues to grow, it will continue to face regulatory challenges stemming from lobbying efforts of the hotel industry. This challenge is common among many start-up companies trying to break into an already existing market, which can be detrimental to a company’s profits at a critical point in its growth cycle. One beneficial move that Airbnb can make is to hire as many lobbyists as it can afford to counteract the hotel lobby. The company can also make alliances with similar “sharing economy” companies, like Uber, to create a joint lobbying effort. Lastly, the company can reach out to those in the hotel industry and form partnerships with hotel chains so that the two parties will have a common understanding and will cease their lobbying fights. Airbnb is an innovative and growing company with regulatory issues to sort out, but if it can navigate its legal landscape properly and hire lobbyists to advocate for its products it has the potential to remain successful.